The Limits Of Taiwan's 'Silicon Shield'

2025-10-06 03:17:01

(MENAFN- Asia Times) US Secretary of Commerce Howard Lutnick brought new attention to Taiwan's“silicon shield” in a September 28 interview , during which he said Taiwan should move half of its world-leading semiconductor manufacturing capability to the United States.

Taiwan produces 60% of the world's semiconductors and 90 of the most advanced chips – not to mention that the industry accounts for 15 %of Taiwan's GDP.

Taiwan Vice-Premier Cheng Li-chiun, who led Taiwan's trade talks with Washington, on October 1 dismissed Lutnick's idea, saying ,“Our negotiating team has never made any commitment to a 50-50 split on chips ... nor would we agree to such conditions.”

Cheng's response reflects the belief of Taiwan's people that global reliance on Taiwan-made chips helps protect the island from a Chinese military assault. That notion has some merit, but it also has limits.

The term“silicon shield” is attributed to a 2000 article by Journalist Craig Addison, who argued that the US would militarily defend Taiwan to“protect its supply of information technology products from Chinese aggression,” just as the US military intervened to expel invading Iraqi forces from controlling oil supplies in Kuwait in 1991.

The updated version of the theory is that China won't attack Taiwan because this would interrupt the supply of semiconductors upon which China's economy depends. China gets about one-third of its semiconductors from Taiwan.

Furthermore, as Addison argued, the reliance of other countries on semiconductors from Taiwan increases the likelihood they would oppose (in the US case, militarily intervene against) China's attack.

Accordingly, moving chip production out of Taiwan would make Taiwan less secure by weakening China's disincentive to attack.

The full story, however, raises doubts about the efficacy of the shield.

To begin with, there is an opposite counter-theory: Taiwan's semiconductor production may give Beijing an additional and decisive incentive to forcibly annex Taiwan, which the Chinese government already wants to do. China may decide it needs to ensure China's access to advanced chips, or cut off the supply of chips to the US, or both.

According to this theory, the race between China and the US to achieve artificial general intelligence – the condition in which AI equals or exceeds human intelligence in most fields of endeavor – could force China's hand even if there is no other compelling political, economic or military reason for Beijing to attack.

Even if the shield works now, what about in the medium-term? Taiwan may not be able to sustain its dominance of global semiconductor manufacturing given that the Chinese, American, Japanese and South Korean governments are heavily investing in their own indigenous semiconductor industries, partly to escape the vulnerability of over-reliance on a supplier that is under threat of military attack. The 2022 CHIPS and Science Act, for example, provided almost $53 billion to expand America's indigenous chip industry.

Taiwan is seeing a decline in the availability of qualified engineers who produce chips. On top of a shrinking general population, smaller percentages of Taiwan college students are choosing to major in STEM fields. Some also take overseas jobs that offer higher pay and more favorable work-life balance. Moreover, climate change is worsening chronic water shortages in Taiwan. Chip manufacture requires heavy water usage.

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