It’s hard to know when the end of the tunnel will be. After Covid and the war in Ukraine, tensions around the island of Taiwan are likely to have a heavy impact on semiconductor production.
Since the pandemic in late 2019, and the explosion of demand for semiconductors, Taiwan has become the center of the world since the island accounts for almost half of the world’s production alone. Faced with the crisis, the main player in the sector, TSMC, has doubled its efforts to increase the production of semiconductors, the shortage of which is freezing the market for a good number of activities (automotive, mobile, video games, computer hardware, etc.). And just when we thought we were finally seeing the end of the tunnel, new tensions may (will?) finally aggravate the situation.
Tension between the United States, Taiwan and China
Taiwan is currently in the middle of a crisis. The small island is indeed at the center of all attentions and the recent escalation of violence in Ukraine has echoed to the other end of Asia. Taiwan fears for its security and independence and finds itself caught between its neighbor, China, which plays the passive-aggressive card, and America, which polices the world. Except that yesterday, Tuesday 2 August, things got worse at high speed.
Earlier in the week, the Americans had announced the visit of Nancy Pelosi, 82 years old and number 3 in the government, to the island of Taiwan despite the tensions. A “visit” frowned upon by China, which denounced a “serious violation of American commitments to China, which seriously undermines the peace and stability of the region. The Asian giant finally threatened its neighbors by saying that this American maneuver would not go unpunished.
Certifying that they were coming “in peace”, the Americans preferred to ignore China’s warnings and sent Miss Pelosi and her escort of military planes to the outskirts of Taiwan. The escalation was not long in coming, and China, after deploying some twenty planes and announcing that military maneuvers would be carried out off the Taiwanese coast, finally declared that numerous trade sanctions were going to be put in place.
Trade sanctions and risk of escalation
The Asian giant has indeed assured that it will suspend the export of natural sand, a raw material essential to the production of semiconductors. And as if things were not ugly enough, the big boss of TSMC, Mark Liu (who must also talk with the famous American representative) to ensure thatin case of escalation of China, its factories will stop working altogether, thus impacting not only the Chinese economy, but also the world economy.
No one can control TSMC by force. If you (China) rely on military force or invasion, you will make TSMC’s factories inoperable.
Semiconductor shortages are not ready to stop. China’s economic sanctions are already likely to put a big dent in an industry that is struggling to get its head above water, but if tensions escalate, the situation is likely to get worse, in every way.
Sony, Microsoft, Nintendo and many other companies in different sectors are likely to be impacted once again by the shortage. Such a situation is likely to hurt the industry as well as consumers. PC component prices have already skyrocketed, and while the console sector has not yet been officially hit by a price hike, it’s only a matter of time before hardware continues to be scarce. Not to mention the scalpers who will still have a field day.