What if China decides to expropriate TSMC
TSMC is a major role in the technological business, to the point where, while other companies develop the chips, it is the Taiwanese company's manufacturing factories that mass-produce them, and this is not by chance. It will be the first foundry to build integrated chips on the three-nanometer scale, something they have been working on for quite some time and which has piqued the curiosity of many firms who design their chips to be made by TSMC.
As a result, as the company responsible for 54 percent of the worldwide chip market, we can state without a doubt that if TSMC has a problem, the implications could be global. A recent example of this is the occurrence of restrictions due to the coronavirus in one of its plants, which could create a weeks-long delay in the release of the iPhone 14 Max.
Although TSMC's headquarters are in Taiwan (its abbreviation stands for Taiwan Semiconductor Manufacturing Corporation), the company has multiple production units in China, to which we must add the geopolitical situation between China and Taiwan. In other words, the world's largest chip production firm is physically located in an area that is now solid, but it is far from the most reassuring in the world.
Indeed, we have been hearing for some time about suspected Chinese ambitions to invade Taiwan and take territory that it has historically claimed since its independence. And, while such aggression may have looked incredibly remote just a few months ago, the experience of what happened between Ukraine and Russia has served as a reminder that, in reality, it can happen at any time.
Western interests in TSMC are evident, and China sees TSMC as a massive strategic target due to its reliance on numerous global technological businesses. And the fact that this corresponds with an improvement in relations between the West, primarily the United States, and China is not a good sign. On the contrary, it should cause us to be concerned about TSMC's future.
According to TechSpot, Chen Wenling, chief economist at the government-run China Center for International Economic Exchanges, stated, "If the United States and the West put devastating sanctions on China, similar to the sanctions imposed on Russia, we must reclaim Taiwan." In a more explicit statement, he stated, "We must grab TSMC, especially in the renovation of the industrial chain and supply chain."
The West is significantly dependent on Taiwan's industry, and any unfriendly action by China toward Taiwan would be received with international condemnation. However, the confrontation between Ukraine and Russia has once again demonstrated that, as the phrase goes, there is a long way between speaking and doing. Of course, if China decides to take over TSMC and is able to do so, the repercussions could be disastrous.
At the moment, we are merely discussing the opinion of an economist, although a very well-placed economist in China, but now could be a good time to start developing an alternative strategy, an option B to fall back on if tensions erupt China seizes control of TSMC. It is possible to wish that this never happens, that peace will continue, but we live in a period when we cannot be certain of this.
