The mid-air crash in 2001 between an American EP3 spy plane and a Chinese fighter jet that left the Chinese pilot dead and 24 American crew members in detention after an emergency landing in China.
China seized an American underwater drone in the South China Sea in 2016. The U.S. sent radio messages requesting that the drone be returned, but the Chinese ship merely acknowledged the messages and ignored the request. The US subsequently demanded the drone’s return.
Taiwan Semiconductor Manufacturing Co (TSMC) has emerged over the past several years as the world’s most important semiconductor company, with enormous influence over the global economy. With a market cap of around $550 billion, it ranks as the world’s 11th most valuable company. Its dominance leaves the world in a vulnerable position, however. As more technologies require chips of mind-boggling complexity, more are coming from this one company, on an island that’s a focal point of tensions between the U.S. and China, which claims Taiwan as its own.
The situation is similar in some ways to the world’s past reliance on Middle Eastern oil, with any instability on the island threatening to echo across industries….Being dependent on Taiwanese chips “poses a threat to the global economy,” research firm Capital Economics recently wrote. Its technology is so advanced, Capital Economics said, that it now makes around 92% of the world’s most sophisticated chips, which have transistors that are less than one-thousandth the width of a human hair. Samsung Electronics Co. makes the rest.
The U.S., Europe and China are scrambling to cut their reliance on Taiwanese chips. While the U.S. still leads the world in chip design and intellectual property with homegrown giants like Intel Corp. , Nvidia Corp. and Qualcomm, it now accounts for only 12% of the world’s chip manufacturing, down from 37% in 1990, according to Boston Consulting Group. President Biden’s infrastructure plan includes $50 billion to help boost domestic chip production. China has made semiconductor independence a major tenet of its national strategic plan. The European Union aims to produce at least 20% of the world’s next-generation chips in 2030 as part of a $150 billion digital industries scheme.
The Taiwanese maker has also faced calls from the U.S. and Germany to expand supply due to factory closures and lost revenues in the auto industry, which was the first to get hit by the current chip shortage.
Semiconductors have become so complex and capital-intensive that once a producer falls behind, it’s hard to catch up. Companies can spend billions of dollars and years trying, only to see the technological horizon recede further. A single semiconductor factory can cost as much as $20 billion. One key manufacturing tool for advanced chip-making that imprints intricate circuit patterns on silicon costs upward of $100 million, requiring multiple planes to deliver…
Taiwanese leaders refer to the local chip industry as Taiwan’s “silicon shield,” helping protect it from such conflict. Taiwan’s government has showered subsidies on the local chip industry over the years, analysts say.
Excerpts from Yang Jie et al., The World Relies on One Chip Maker in Taiwan, Leaving Everyone Vulnerable, WSJ, June 19, 2021
Taiwan’s Kinmen, a cluster of tiny islands two kilometres (just over a mile) off the coast of China’s Fujian Province…is facing a new threat: a water shortage. Officials say that groundwater on its largest island is being depleted. Tourism from the mainland China, which has grown rapidly since 2008…, is putting pressure on its reservoirs…. Kinmen’s water authorities are ready to sign a 30-year agreement with their counterparts in Fujian to buy water from Longhu Lake in Jinjiang city. Taiwan is to build a submarine pipeline 17km long from Fujian’s coast to Kinmen at a budgeted cost of 1.35 billion Taiwanese dollars ($44m). After 2017, when it is scheduled to be finished, China will eventually provide up to 40% of Kinmen’s water. The signing is expected soon after a meeting on Kinmen on May 23rd between ministers from China and Taiwan, the first such encounter on the islands since the time of Mao.
When Taiwan’s parliament approved the budget for the pipeline in January 2015, the opposition Democratic Progressive Party (DPP), which supports independence, made surprisingly few objections. Only the small, hardline Taiwan Solidarity Union voiced concerns about having such a large share of Kinmen’s water supplied by China. Pragmatists see the deal as the best way to boost Kinmen’s economy: piping water from China is much cheaper than using desalination plants. Taiwanese officials would be allowed to carry out inspections in China, such as testing water in the lake.
The Politics of Water: Peace Pipe, Economist, May 23, 2015, at 32.
Law-In-Action 