Chinese military action against Taiwan seems to grow increasingly likely by the day; the US intelligence community’s latest estimate believes a potential invasion of Taiwan could occur as early as 2027. The implications of military action in Taiwan would be devastating to US national output, because Taiwan houses much of the manufacturing capacity of a company that is key to the US economy: Taiwan Semiconductor Manufacturing Company (TSMC). TSMC controls over 90% of the production for advanced microprocessors that are integral to most modern electronics. Meaning that they are a “lynchpin” supplier for a sector of the economy that constitutes 11.8% or 3.01 trillion dollars of US national GDP each year.  

90% of TSMC’s production remains in Taiwan and will assuredly be rendered inoperable in the case of a Chinese invasion. After thorough coaxing by successive administrations, TSMC is earmarking 65 billion dollars in a construction project in Arizona consisting of three foundries that would greatly boost American domestic capacity; however, delays stemming from issues with unions has delayed operationality of its second facility past 2027, after the expected invasion of Taiwan is to occur. Additionality, researchers are sceptical about the efficiency of these facilities once they are built due to the domestic labour market shortage in the US, specifically semiconductor engineers and technicians. 

In 2022, the bipartisan CHIPS and Science act passed with the purpose of promoting “American manufacturing, supply chains, and national security” the goal would be more government investment in the domestic manufacturing of semiconductors to mitigate dependence on Taiwan amidst its rising geopolitical tensions with China. However, the US is currently unable to keep up with the expected timeline for the construction of the foundries. The current US labour market does not have sufficient expertise to build or maintain the productivity of the foundries. Visa issues have stalled the advancements in domestic production capacity of the CPUs made by TSMC. Experienced Taiwanese engineers who are crucial  for the completion of the second foundry before the invasion of Taiwan are not able to work in the US. The main stakeholders affected by this problem are domestic manufacturers who depend on microprocessors (e.g. Apple, Microsoft) or chip companies such as Nvidia or Qualcomm. 

Between 1990 and 2021, the US share of global semiconductor manufacturing capacity declined from 40% to less than 15%. This is largely due to the emergence of TSMC, an event that completely changed global tensions. TSMC was founded at a time when the Taiwanese government began to direct FDI and government capital towards technologically advanced sectors. The founder of TSMC has publicly declared that he received a “blank check” from then Taiwanese finance minister, Lin Chen- Kuo that contributed 48% of its startup capital. Since then, TSMC’s success has been staggering; it holds a 90% market share of the physical production of advanced microprocessors that are essential to the supply chain of complicated electronics.  

This is proved by the construction of three foundries in Arizona, where 65 billion dollars are committed between federal, local subsidies and investment from TSMC.  They are taking severe measures to diversify the production centres. However, even when the first foundry becomes operational, it will only produce older generation 4-nanometer chips and can be easily sourced from the factories TSMC have in Japan, making the first foundry inconsequential for national security purposes. US national security would only really be improved through the second and third foundries, where cutting-edge 2-nanometer and 3-nanometer chips that are capable of technologies such as 5G/6G, and can power smartphones, autonomous vehicles and AI datacentres. These are all technologies critical to both the functioning of American society and the US economy. Originally, the second foundry was expected to be fully functional in 2025. However, it has since been delayed to 2027. TSMC has complained of “poor work ethic and a tendency to strike, as well as blockages of TSMC’s attempts to import construction workers with the requisite knowledge to build the foundries on schedule. 

There is real reason to be concerned about Chinese military action; in December 2023, President Xi Jinping of China said that “the reunification of the motherland is a historical inevitability …  that must and will be achieved”. Moreover, TSMC Chairman Mark Liu has warned that its factories would be “inoperable” in the case of an invasion, either through direct Chinese offensives or through attrition strategies. This, in addition to the US’s inability to manufacture its own supply of semiconductors, makes it increasingly clear that the US is severely unprepared to face a Chinese invasion of Taiwan.