Background
Taiwan's semiconductor industry accelerated in the 1990s, with the foundry model, when manufacturer TSMC began manufacturing chips to American designs. [1] By the end of the decade, the industry was sufficiently matured that the term "silicon shield" had been used in commentary in the context of economic risks of a Chinese invasion. [2] TSMC's manufacturing and design capabilities continued to advance, and by the 2020s its facilities in Taiwan manufactured the most advanced chips in production. [3] As a whole, Taiwanese manufacturers accounted for about 60% of all semiconductors manufactured globally in the early 2020s, by multiple estimates, and TSMC produced over 90% of the most advanced generation of chips. [4] [5]
In 2019, Chinese dictator Xi Jinping threatened to invade Taiwan. [6] In 2025, it was revealed that China was building at least five new huge bridge barges which appear to be tailor made for the amphibious assault of Taiwanese beaches. [7] These bridge barges have the capability to anchor into the seafloor and extend a bridge 393 feet to the beach head, allowing the unloading of tanks and trucks from ship to shore. China has for decades claimed Taiwan as part of its sovereign territory through the One-China Policy.
In 2022, amid the global 2021-2023 inflation surge, Democratic President Joe Biden said the US would respond militarily if China tried to invade Taiwan. [8] A Chinese invasion of Taiwan would drastically increase the cost of semiconductors. [9] Later in 2022, US House Speaker Nancy Pelosi visited Taiwan, which caused a surge of violations of Taiwan's airspace from the Chinese military. [10] In the years since, under Republican President Donald Trump, the US has walked back claims of a military response regarding a Taiwan invasion and appears to be using a policy of strategic ambiguity. [11]
Principle
According to the New York Times, "Taiwan has relied on its dominance of the microchip industry for its defense," and that, "because its semiconductor industry is so important to Chinese manufacturing and the United States consumer economy, actions that threaten its foundries would be too risky." [12] The logic behind the principle relies on the collective dependence of the global economy on the chips manufactured in Taiwan, particularly China and the United States, the other two primary players in a potential Taiwanese armed conflict. While American industry accounting for only 12% of global chip production in 2021, American companies remained prominent in development while outsourcing the production, and Taiwanese companies accounted for about 65% of this contract manufacturing in the early 2020s. [4] In parallel, Chinese development of domestic semiconductor technology lagged, forcing its manufacturers of computer hardware to import the required chips, including over $100 billion worth of Taiwanese chips in 2021. [13] The collective dependence by all parties is deep enough that a United States government analysis found a potential Taiwanese conflict in the form of a blockade by China would cost the global economy as much as $2.5 trillion, [5] while a report from Bloomberg projected a cost of $5 trillion. [14]
The potential effects of a conflict are presumed to support a continuation of Taiwan's independently governed status quo by incentivizing restraint by China, as a result of its dependence on steady supplies of chips from Taiwan, and the interest of foreign powers in intervening to prevent a disruption to their imports. [5] As a result, Taiwan's government has referenced the value of its semiconductor industry in protecting its sovereignty; President Tsai Ing-wen referred to the industry as supporting national security, and her government considered it to be a "divine mountain that guards the nation" [13] [3] while her successor Lai Ching-te suggested that other global powers had an incentive to prevent a conflict. [14]
In 2022 President Joe Biden again went as far as to threaten China with war if they tried to invade Taiwan. [15] However, Biden also passed the CHIPS and science act which provided about $50 billion in subsidies for manufacturers, including TSMC, to build chip production facilities in the US.
By 2025, the shield was seen as being at risk due to the turn in administrations under Donald Trump towards domestic manufacturing and economic protectionism. [16] The second Trump administration prioritized American manufacturing beyond that of Biden, leading TSMC to announce further investments, including factories capable of producing its latest generation chips. [14] Additionally, US export controls on technology developed by American companies led to a ban on the sale to China of certain chips for use in artificial intelligence applications, a move seen as providing further incentive for China to invest in its domestic chip industry. [5]
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