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China Taiwan conflict: More important than being thought of

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Taiwan, officially known as republic of China, is an island separated from its neighbour China by the Taiwan strait. Though Taiwan has been governed independently of China since 1949, Beijing still views the island as a part of its territory and has also stated that it will not make any compromises in unifying Taiwan within its territory. It has also been  stated that it may use physical means as well if necessary. These statements and actions question the sovereignty of Taiwan.

In the past two years, ruefully many have lost their beloved ones, many have lost their jobs, and there have been cuts in people’s incomes, which along with the cost of living has seen an increase mostly everywhere. Furthermore The COVID 19 pandemic has made everyone’s lives gruelling. Since the devastating pandemic when the world’s  major economies were shrinking and endangered, Taiwan’s economy has been  expanding incessantly and is at its heights.

In reference to semiconductors, since the beginning of the pandemic there has been a shortage of chips. The drawback of the chip shortage is that it’s the mind behind the everyday devices we use, and if its production is halted it could become a serious setback for various companies, as devices , cars etc. are incomplete without semiconductors installed in them.

The worldwide chip scarcity which can last for years rather than months, has also come as a a shock as many were left astonished to see how a company came into spotlight and now plays a crucial role in the world economy which not many had heard about. As other countries were not able to conjure the volume of semiconductors that were required, Taiwan’s TSMC’s role escalated.

Taiwan is now the world’s largest producer of semiconductors. Taiwan Semiconductor Manufacturing Co. is the world’s largest semiconductor foundry and boasts 92% of production when it comes to advanced chips used in iPhones , super computers, automotive AI, etc. It has various clients, ranging from Apple, Intel, Qualcomm and many more. 

Companies in Taiwan were also responsible for more than 60% of the revenue generated by the world’s semiconductor chip manufacturers in the year 2020. 

This is the global hegemony that Beijing envies. China is also Taiwan’s largest trading partner, and in recent unfortunate times, Chinese importers have bought the highest volume of exports coming from Taiwan. Today, all large economies can see clearly how they depend on Taiwan, which has made its way from undergrowth and now plays a crucial role in their survival. Many countries now support Taiwan, have encouraged them to stand their ground, and  support their independence. Developed economies like New Zealand and Singapore have also signed free trade agreements with Taiwan even after China objected and proclaimed them not to do so.

Because of the chip shortage, US cars were 10% more expensive in April 2021, and the price was up by 21% in secondhand cars. These types of numbers have been repeated in the United Kingdom and also in Australia, where car prices have risen as well. A large number of cars are also left unfinished, waiting for semiconductors to be added, as the chip scarcity causes heavy losses.Outside the Volkswagen Navarra factory in Pamplona as well, around 5,000 cars stood unfinished because of the lack of chips in May 2021.

In recent years, both China and the US have desperately tried to catch up with Taiwan’s semiconductor industry, which is developing day by day. Though neither of them has gotten near Taiwan’s dominant TSMC. Even the US and China’s continued attempts to become more self-reliant have failed as the dependency on Taiwan is not decreasing but increasing. Also, the fact that bothers Beijing is that, in the semiconductor industry, China is further behind the US and Europe. A simple answer to this is that it is not investing in semiconductor technology as much as the US and Europe are.

In 2018, the US invested 18 times more than China in absolute dollar terms. After Washington pushed TSMC to stop selling to Chinese companies, including Huawei, the progress made by China so far has been disturbed. The solution to all the semiconductor progress issues in China will be automatically resolved if Beijing accomplishes its “One China policy”. But the problem is that no one can predict how China will make a move towards accomplishing its One China policy over Taiwan. Will it be a diplomatic move, or will it be a military conflict, or will there be any movement at all? No one has the absolute answer to this question.

As the whole world is dependent on Taiwan for semiconductors and as the chip crunch continues, any conflict does not only affect Taiwan’s sovereignty but poses a threat to the global economy. China’s latest military activities have also hinted at a possible military conflict in the near future, which threatens Taiwan’s chip production. So any possible danger to Taiwan’s chip production will have a worldwide effect and may increase the chip scarcity and make it even worse.

Today, the automobile industry and the telecommunications sector are suffering huge losses. It is clear that the cross-strait tensions could hurt Taiwan’s semiconductor industry. If China gains control of TSMC, it may use it as leverage over the countries with which it will trade and, in effect, control some parts of their economies. If a military conflict takes place and the semiconductor industry in Taiwan is disrupted, then it could put the global economy at risk. 

Since the pandemic, Taiwan has been lobbied by many governments for chips, like the US, Japan, etc. Experts argue that the reason the USA supports Taiwan is just that they are dependent on Taiwan for semiconductors. But if this statement is correct? That time will tell. 

As the dispute could affect the entire world, policies to resolve the matter should be made with urgency and such that both nations can agree on them. A scenario where China takes control over Taiwan by any method should be prevented as it could harm the financial state of the world and also world peace and prosperity.

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