Expert: China, Taiwan tensions threaten global semiconductor industry

The global semiconductor industry will be impacted if China and Taiwan enter into a military confrontation, an expert on US national security strategy has said, adding Washington doesn't have a quick solution to avoid dependence on Taiwan's chip industry.

The US does not have any "short-term solution to dependence on Taiwan's industry at this moment," Melaine Sisson, who focuses on the integration of Artificial Intelligence into warfighting and enterprise operations at the US Department of Defence, said on Friday during a discussion hosted by Brookings Institute.

Insisting that "the US Chips Act is not a direct response" to Beijing's current activities surrounding Taiwan, Sisson said, "the $52 billion incentive to manufacturing in the United States is not going to solve anything in the near term."

"It's a first step and a long-term approach."

Also on Friday, the US hosted a preliminary meeting of a working group, dubbed 'Chip 4', to discuss semiconductor supply chain resilience and cooperation.

The group includes Taiwan Semiconductor Manufacturing Co Ltd, the world's largest contract chip maker, South Korean memory chip giants Samsung Electronics Co Ltd and SK Hynix, and key Japanese suppliers of semiconductor materials and equipment.

Washington has vowed to continue to deepen its "unofficial ties" with Taiwan. The island is claimed by China, which calls it a breakaway province. Taiwan says it's independent and has diplomatic ties with over a dozen countries. 

The tension between Beijing and Taipei soared when US House Speaker Nancy Pelosi visited the island in August.

China immediately conducted large-scale military exercises around Taiwan that included firing missiles and blockading Taiwan Strait.

READ MORE: US Congress passes $280B chip bill to counter China

Significance of Taiwan chip industry 

While the US welcomes the expansion of chip manufacturing in the EU, Japan, India, and other countries, Taiwan "is going to remain central" to the broader global economy, Tarun Chhabra, an official with the US National Security Council who focuses on technology issues, said at the Brookings Institute discussion. 

"Everyone knows that Taiwan is central when it comes to the global supply chain,  semiconductors in particular and in other technologies as well, and it’s going to remain that way," Chhabra said.

"That is a reality and something that we're going to continue to be focused on and work with our friends in Taiwan."

As the United States tries to gain a more competitive advantage against China in the semiconductor industry, keeping the country's dominant spot in the Research and Development area, along with boosting chip manufacturing, workforce, and supply chain has been the focus of the US Chips and Science Act.

"The United States needs to remain a powerhouse on RND (Research and Development) not just in the current paradigm but also for next-generation chips as well," Chhabra said.

Echoing the words of US National Security Advisor Jake Sullivan, Chhabra stressed the importance of the Act's provisions, including the "Guardrails" - a provision that puts limitations on advanced technology transfer to China and other designated "countries of concern".

"There are restrictions on investments on leading edge semiconductor productions in China in particular. There is also a provision that puts restriction on legacy production as well where this technology is not going to stay in China," Chhabra said.

US President Joe Biden signed into law the Chips and Science Act on August 9 which seeks to boost American semiconductor research, development, and production, ensuring US leadership in the technology. 

Biden administration is planning to broaden curbs on US shipments to China of semiconductors used for artificial intelligence and chipmaking tools, according to the Reuters news agency.

READ MORE: Scientists divided over US blocking key chipmaking equipment sale to China