A Discussion on Geopolitical Risk of Taiwan Semiconductor Industry

Abstract

Is the semiconductor industry in Taiwan a "Silicon Shield" that deters potential military conflicts? Widely believed among business elites and the general public, the concept comes from two aspects: China's dependence on Taiwanese chips for economic growth, making war in the Taiwan Strait too costly, and the reliance of the US and its allies on chip supplies from Taiwan, prompting them to deter potential geopolitical risks. However, the "Silicon Shield" concept has flaws. Neither liberalist nor realist theories guarantee a causal relationship between interdependence and peace, with liberalists ignoring realists' concerns about vulnerability issues and realists downplaying the restraining force of international trade on aggressiveness. The naive expectation of balancing also presents a flaw. The author argues that despite the tight linkage between the US and China in the semiconductor value chain, negative expectations of trade wars and further technology restrictions may result in militarized conflicts.