War in Taiwan would be an economic ‘global disaster’

Taiwan’s business elite warn that any invasion by China of the tech-rich island, which supplies over 60 per cent of the world’s computer chips, would bring the global economy to its knees.

As mainland China ratchets up its threats against Taiwan, the vulnerability of major chip makers including TSMC, UMC and Macronix have been exposed, sparking concerns across the global supply chain. Picture: Glen Norris

Taiwan’s business elite warn that any invasion by China of the tech-rich island democracy would bring the global economy to its knees.

The nation of 23 million supplies more than 60 per cent of global demand for chips – the tiny components that power the electronics in everything from jetliners and trains to game consoles and e-bikes. As mainland China ratchets up its threats against Taiwan, the vulnerability of major chip makers including TSMC, UMC and Macronix have been exposed, sparking concerns across the global supply chain.

Macronix founder and chairman Miin Wu told The Australian in Taipei that any war would be a “disaster for the world.” “The whole world economy would be in trouble because of our leading position in chips,” he said at Macronix’s giant manufacturing complex at Hsinchu, south of Taipei.

“I don’t have a crystal ball but both the US and China want it (Taiwan’s chips) so if they both want it why would they bomb? Maybe if some one doesn’t get it.” Foreign affairs experts in Taiwan said this week that any invasion would likely be “very fast” to prevent intervention from the international community and would target the leadership in Taipei.

Taiwan leads the world in semiconductor production. Picture: Glen Norris

Mr Wu, who founded the company more than 30 years ago after working for Intel in the US, said his decision to keep all his manufacturing capacity in Taiwan had been raised as a vulnerability but he could not see an alternative. “One of my customers raised this issue with me the other day but what else can I do?“ he said. “The US is not cost effective for semi- conductor production.”

The US along with Europe and Australia are looking at ways to boost their semiconductor manufacturing capacity in the event of conflict in the Taiwan Strait.

The US Chip Act has earmarked billions of dollars for that purpose. “The Chip Act is only for national security reasons,” Mr Wu said. “It is not going to work.”

Mainland-born Mr Wu was part of a crop of brilliant engineers who trained in the US before returning to Taiwan in the 1980s as part of a “reverse brain drain”.

Although he professed no views on big political issues such as reunification with China, claiming he is just a “little guy”, he paid credit to the island’s politicians who laid the ground work for the island’s economic success.

Delta Electronics’ showroom.

A few kilometres from Macronix is the campus of the government-backed Taiwan Industrial Technology Research Institute, a start-up incubator and research body that has spun out thousands of companies over the past 50 years including TSMC and United Microelectronics, now the world’s biggest chip makers.

Mr Wu said the environment in Taiwan that had created the chip sector would not be easy to replicate elsewhere. Last year, the NSW government announced the establishment of a Semiconductor Services Bureau to promote the development of semiconductor manufacturing but experts caution Australia will face a long road building any meaningful capacity.

Delta Electronics is one Taiwanese company not putting all its eggs in one basket. Founded in 1971 by Bruce Cheng to produce television components, Delta only has 15 per cent of its factories in Taiwan, recently announcing plans for a new facility in Texas.

Delta spokesperson Alessandro Sossa said diversification has been key to the company’s success. “We established our first factory in Thailand 30 years ago,” Mr Sossa said. “We are trying to be as diversified as possible into Europe and the US.”

Taiwan Deputy Minister of Economic Affairs Lin Chuan-neng said unlike other manufacturing capacity the island’s semiconductor sector could not just be moved to another location in the event of war.

“It is a very difficult process to maintain with a need for a secure supply of water and power,” said Mr Lin. “I just cannot imagine how you would maintain that if there is a war.”

The author visited Taiwan courtesy of the Ministry of Foreign Affairs Republic of China (Taiwan)