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EMEL AKAN is a senior reporter for The Epoch Times in Washington, D.C. Previously she worked in the financial sector as an investment banker at JPMorgan. Emel Akan

Taiwan Remains a Big Geopolitical Risk in 2022

Will Beijing attempt to seize Taiwan and disrupt the global economy?

China’s top diplomat recently said Taiwan is a “wanderer” that will eventually “come home” to China. Such rhetoric by Chinese Communist Party (CCP) officials, along with increased Chinese military aircraft incursions near Taiwan in recent months, have spiked a new wave of fear and media speculation that a Chinese invasion of the island may not be far away.

Some media commentators believe that the tension in the Taiwan Strait stands as one of the world’s biggest geopolitical risks in 2022. China claims sovereignty over Taiwan and in the past two years has stepped up threats to take control of the island.

Such a move would inflict economic pain on many countries, as Taiwan is a crucial hub for the global semiconductor supply chain, according to experts. A Chinese military takeover would cause severe supply shocks across many industries that heavily rely on chips made in Taiwan.

Taiwanese companies, both large and small, account for about 65 percent of global sales of outsourced chips. Taiwan Semiconductor Manufacturing Company (TSMC), the crown jewel of the island, alone generates 56 percent of global revenues.

“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,” said Keith Krach, former undersecretary of state who played a crucial role in the warming of relations with Taipei under the Trump administration.

TSMC ranks as one of the world’s most valuable companies, with a market capitalization of nearly $600 billion.

“To put it in perspective GDP [gross domestic product] of Taiwan is around $750 billion. That certainly makes the China–Taiwan tensions more combustible,” Krach said.

While the world’s major chipmakers race to produce the smallest chips possible, only TSMC and South Korea-based Samsung can produce the cutting-edge standard, which is five nanometers. TSMC recently announced that it would start producing the next-generation 3-nanometer chips in the second half of 2022.

China, by contrast, is sitting at the lower end of the semiconductor value chain. It only holds 5 percent of the market share in global sales and relies heavily on foreign suppliers for advanced chips. China is at least 15 years behind in the semiconductor space, according to industry estimates. Seeing this gap, Beijing has been aggressively using shortcuts to catch up, such as stealing trade secrets and recruiting talents from abroad.

A recent paper published by the U.S. Army War College recommended that Taiwanese authorities “destroy facilities belonging to” TSMC in the face of a Chinese invasion as a deterrence strategy. The paper claimed that such a move would “produce a major economic crisis” in China, whose tech sector is heavily dependent on TSMC.

Rupert Hammond-Chambers, president of the U.S.–Taiwan Business Council agrees that an invasion would take Taiwan’s chip production almost immediately offline, causing dramatic consequences for global supply chains.

However, Hammond-Chambers noted that such a move would be political suicide for Chinese leader Xi Jinping, especially before his expected election for an unprecedented third term at the communist party’s National People’s Congress in autumn. Beijing uses threatening rhetoric consistently, “and to me, it doesn’t represent a raising intention” of an actual military attack, he said.

China’s Foreign Minister Wang Yi has accused the United States and other countries of trying to “use Taiwan to control China.”

“Taiwan is a wanderer who will eventually come home, not a chess piece to be used by others. China must and will be reunified,” Wang threatened in a recent speech.

“Labelling Taiwan a ‘wanderer’ is a classic bullying move,” Krach said. “Tyrants can’t persuade, so they bully, especially when their own deck of cards is weaker than they want others to think.”

It’s unclear if Beijing will embark on a military adventure over Taiwan in 2022. But its growing ambitions go beyond being a threat to the island’s 23.5 million people and to global supply chains, according to Taiwan President Tsai Ing-wen.

“If Taiwan were to fall, the consequences would be catastrophic for regional peace and the democratic alliance system,” she wrote in a recent op-ed for Foreign Affairs.

A Chinese military takeover would cause severe supply shocks across many industries that heavily rely on chips made in Taiwan.

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