China versus Taiwan: "An escalating conflict would be a disaster for Germany"
Created: 08/04/2022, 08:00
By: Sven Hauberg
At the end of July, Taiwan rehearsed the emergency during an annual military exercise.
© Sam Yeh/AFP
The Taiwan conflict is far away?
No way: Germany would also feel the effects of an escalation.
The "super meltdown" threatens.
Munich/Taipei – Nancy Pelosi has left Taiwan.
On Wednesday afternoon (local time), the Speaker of the US House of Representatives boarded a plane in Taipei that was supposed to take her to South Korea.
However, the Taiwan conflict is far from over with the departure of the 82-year-old.
Beijing has announced extensive military maneuvers around the island in the coming days, and observers agree: China will one day seek to "reunite" the democratic country, which Beijing regards as a "breakaway province," with the communist mainland.
An escalating Taiwan conflict would primarily have consequences for the almost 24 million inhabitants of the small country.
But the global economy would also be badly hit should there be a Chinese attack.
"The situation around Taiwan has been worrying me about the global economy - but also for the German economy - for some time now," says Sebastian Dullien, director of the Institute for Macroeconomics and Business Cycle Research (IMK) of the trade union-affiliated Hans Böckler Foundation.
"If you look at where semiconductors and other preliminary products are produced, what the supply chains look like, then an escalating conflict would be a disaster for Germany," Dullien told
Merkur.de
from
IPPEN.MEDIA
.
TSMC, the world's largest independent contract manufacturer for semiconductors, has its headquarters in Taiwan – more precisely in the 450,000-inhabitant city of Hsinchu in the north-west of the country. The chips that TSMC produces are among the best the market has to offer .
And they are in countless products that we use every day: in iPhones and other cell phones, in elevators and food processors, in cars and televisions.
"TSMC is systemically relevant," says economist Wan Hsin-liu from the Kiel Institute for the World Economy to
Merkur.de
from
IPPEN.MEDIA
.
"If TSMC can no longer export its chips, this will affect the global supply chains, but also the stability of the global economy in general." This is one of the reasons why Pelosi also visited TSMC after her political appointments and met with CEO Mark Liu.
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Taiwan conflict: The West depends on chips from the Far East
TSCM is particularly good at making chips that are very small and very powerful.
Experts speak of chips with extremely small structural widths.
In the range of 5 nanometers structure width, TSCM is already ahead of the South Korean competition from Samsung;
and as early as this year, the Taiwanese want to produce even smaller chips, which could then first be installed in Apple products.
Should Taiwan no longer be able to export these semiconductors - for example because China cuts off the trade routes - German consumers would quickly feel the effects.
The industry is already complaining about a lack of chips, even though falling demand from private households has recently eased the situation temporarily.
Should China actually attack Taiwan, of course it cannot simply be accepted, says Sebastian Dullien from the Hans Böckler Foundation.
"The question is: how do you deal with it?" Should the West issue sanctions against China, it would be a "massive economic shock", especially since China would probably react with counter-sanctions.
“The latest generation of semiconductors are only made in Taiwan and South Korea, so we would have a really, really massive problem.
That would be a super meltdown for the global economy.”
A mega disaster with announcement, because the dependency on Taiwanese chips is similar to that of Russian gas.
In order to reduce the enormous dependencies on TSMC and other manufacturers from the Far East, Europe and the USA are trying to promote domestic semiconductor production.
This is partly done in cooperation with manufacturers from Taiwan and South Korea.
"However, it is still very unclear whether and how this can ultimately work," says expert Liu.
In any case, the EU could launch the "European Chip Act" as early as the beginning of 2023, a program worth billions to promote domestic semiconductor production.
Also at the beginning of next year, Intel wants to break ground for its new semiconductor plant in Magdeburg, and Bosch also wants to invest three billion euros in its semiconductor business by 2026.
However, the EU states still have to agree on a common position, which could happen in December at the earliest.
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The USA want to become more independent from China - and promote chip production in their own country
The USA are already further along.
Congress passed the Chips Act just a few days ago.
52 billion dollars are to be pumped into US semiconductor production in the next few years.
The law is also aimed at China: Manufacturers who want money from the subsidy pot must undertake not to increase their production of modern chips in the People's Republic.
Because China is also trying to become a semiconductor superpower.
And is making amazing progress.
The Chinese chip manufacturer SMIC recently succeeded in producing high-quality 7-nanometer chips.
A development backlog of several years could be made up in this way: just a year earlier, the company had only produced 14-nanometer chips.
The rapid successes of the Chinese are worrying the United States.
At the beginning of July it became known that Washington was apparently pushing the Dutch government to ban the company ASML from selling semiconductor technology to China.
ASML manufactures chip production equipment that Chinese manufacturers could hardly do without.
Especially in the field of UV lithography, which is essential for super-narrow structure widths, there are no real alternatives to the Dutch production facilities.
The situation in the Taiwan Strait is still relatively calm.
But the military maneuvers that China wants to hold in the region from Thursday are already causing unrest among the shipping companies.
According to
Bloomberg
, several gas companies are currently looking for new routes for their LNG carriers so as not to interfere with China's military exercises.
If ships no longer sail through the straits between China and Taiwan, but have to circumnavigate the island to the east, it would take up to three days longer.
Is China Attacking Taiwan – Or Is It Just Imposing Sanctions?
Not only Taiwan and the West would be affected if the conflict intensified.
The economic costs would also be enormous for China itself.
Despite all the tensions, trade between Beijing and Taipei is thriving, and Chinese manufacturers are also dependent on Taiwan's semiconductors.
Both countries are trying to reduce mutual dependencies, but so far without much success.
"China claims that it would accept the economic costs of a conflict with Taiwan, no matter how high," says Kiel-based analyst Wan-hsin Liu.
The Pelosi visit is not reason enough for this.
However, should the independence debate in Taiwan gain momentum, “the situation could deteriorate: then the Chinese government could indeed say: China is ready to do what is necessary to prevent Taiwan's independence, even at high economic costs means for China itself.”
Liu believes that Beijing will do everything it can to minimize the damage to its own country.
Instead of invading Taiwan, the People's Republic could impose targeted sanctions on Taipei.
Beijing took the first steps towards this on Tuesday when it banned the import of Taiwanese products such as seafood, tea and honey.
"Taiwanese products that China absolutely needs and cannot produce itself could be excluded.
China has a certain degree of flexibility and can assess how badly its own companies will be affected.
That would be easier to control than a military strike against Taiwan.” But, she says, “we're not there yet”.
Cooperation: Fabian Hartmann
