Will America Tinker with Taiwan's "Silicon Shield"?

­The Trump Administration is pressuring Taiwan to quickly move half of its semiconductor production to the U.S. or risk losing American military protection. And no, this isn’t the domino that leads inexorably to World War 3 (probably), but it does throw into sharp contrast the so-called “Silicon Shield” and just how critical it is to staving off an invasion from mainland China.

This latest kerfuffle stems back to an interview US Commerce Secretary Howard Lutnick had with Newsnation the weekend of 9/27. In it, Lutnick reiterated support for President Trump’s trade policies, but the really interesting nugget came when Lutnick turned his attention to Taiwan and their virtual monopoly on advanced semiconductor chips.

For the unaware, Taiwan produces about 90% of the globe’s semiconductor supply, with the vast majority coming from the Taiwan Semiconductor Manufacturing Companies (TSMC). What’s more, Taiwan meets a full 95% of America’s semiconductor needs.

But that’s not all – China also relies heavily on Taiwan, receiving up to 54.2% of Taiwan’s total semiconductor exports, good for about 60% of China’s supply.

It’s that complicated web of a supply chain that forms the basis for the “Silicon Shield”, where China – despite its saber-rattling – wouldn’t risk cutting off its own semiconductor supply by invading Taiwan, and even if they were so inclined, America has an even bigger fiscal stake in maintaining the flow of chips.

From Taiwan’s point of view, that “Silicon Shield” is their best defense against the People’s Republic, though her people are decidedly split on the issue – in a recent poll, 44.6% of Taiwanese adults believed their semiconductor industry was an effective deterrent, and what’s worse, only about 1/3 believed the U.S. was trustworthy, and these latest calls to cede half of its domestic chip industry can only increase the agita.

That said, the “Silicon Shield” is far from a certainty. While many believe the destruction or inoperability of Taiwan’s foundries would devastate China’s economy, the PRC’s desire for unification predates the semiconductor industry, and they could consider that an acceptable cost, no matter how devastating.

And it would definitely be catastrophic. As noted by the Council on Foreign Relations, a Chinese blockade or invasion of Taiwan “would force supply chains around the world to grind to a halt, shaving trillions of dollars off economic output and plunging the world into an economic depression.”

Whatever the actual efficacy of the “Silicon Shield,” it’s definitely not in Taiwan’s best interests to cede such a huge chunk of semiconductor manufacturing. Secretary Lutnick hinted that failure to do so could impede America’s ability to defend Taiwan, though it seems more like a transparent reminder of an unspoken quid pro quo.