Dharamshala, 24th February: Taiwan Semiconductor Manufacturing Corp’s intention to develop foundries in Japan and the United States appears to be a typical company expansion at first glance. The $8.6 billion Japanese partnership and the $12 billion US venture bring TSMC closer to consumers in key areas, diversify its supply chain, and even lessen the risk of disruption from Taiwan’s earthquakes.

But dig a little further and it becomes evident that these aren’t your typical offers. As tensions between Taiwan and China escalate, TSMC’s crucial role in the global semiconductor supply chain has emerged as one of the world’s most serious economic threats. As a result, Western countries and TSMC are wrestling with how to avoid a worst-case scenario in which China invades or blockades Taiwan, cutting off a critical supply of semiconductors to the world economy.

It’s difficult to overestimate TSMC’s global significance. According to the European Institute for Asian Studies in Brussels, it accounts for more than half of worldwide foundry revenue and dominates around 84 percent of the global market for advanced processors under 10 nanometers.

These chips are at the heart of every cutting-edge product and weapon in the world, and they are at the center of the competition between the US and China for technological supremacy. That’s why TSMC is “probably the most important firm on the planet,” according to Scott Kennedy, a China and semiconductors expert at the Center for Strategic and International Studies in Washington.

TSMC’s manufacture, on the other hand, is still centered in Taiwan. With China taking a more assertive stance toward the island it claims sovereignty over, the global economy is becoming increasingly vulnerable to upheavals. Chinese warplanes made 554 air defense zone intrusions into Taiwanese airspace in August and September alone. Last year, China’s defense ministry warned that its armed forces are now capable of blockading Taiwan’s vital ports and airports, saying that its massive neighbor posed a “severe” military threat.

It’s a difficult balancing act for TSMC and western nations to migrate away from excessively concentrated production in Taiwan. Clifford warns that rushing it out or putting too much pressure on TSMC to develop a supply chain that excludes China will cause “severe conflict” with Beijing.

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