How the Computer Chip Shortage Could Incite a U.S. Conflict With China

A war game and study by a think tank illustrate how dependent the world is on Taiwan’s semiconductor foundries.

WASHINGTON — The war game scenario conducted by a Washington think tank began with a sudden failure at three Taiwanese semiconductor foundries that make high-end computer chips used in such items as smartphones, automobiles and military equipment.

The halt in production raised questions of whether a cyberattack by Beijing was responsible — touching off an international crisis between China and the United States that the researchers said could grind the global economy to a halt and incite a military confrontation.

The war game and study by the Center for a New American Security, which is set to be released on Thursday, illustrate how dependent the world is on Taiwanese computer chips — and how that dependence could draw the United States and China into various kinds of conflict.

The report comes as Congress has put new energy into bills to increase domestic production of semiconductors in the United States. Diversifying the global supply chain for computer chips is a key recommendation in the report.

Last week, President Biden urged Congress to pass those bills and promised he would work to bring production of semiconductor chips back to the United States.

Today we barely produce 10 percent of the computer chips, despite being the leader in chip design and research,” Mr. Biden said. “And we don’t have the ability to make the most advanced chips now — right now. But today, 75 percent of production takes place in East Asia. Ninety percent of the most advanced chips are made in Taiwan. China is doing everything it can to take over the global market so they can try to outcompete the rest of us and have a lot of applications — including military applications.”

Even if Congress approves new government investments in America’s microchip production capacities, matching Taiwanese expertise is years away, if it is even possible, the report’s authors say. The United States is already more dependent on Taiwan’s high-end microchips than it was on Middle Eastern oil in decades past, the report said.

China, the war game predicts, could use economic coercion, cyberoperations and hybrid tactics to try to seize or harm Taiwan’s semiconductor industry — and the United States must become better able to identify and counter Chinese tactics that could threaten the microchip supply.

War games like this one involve current and former officials, academics and other experts sitting around a table playing various roles. After an initial scenario is presented, the teams take turns making strategic decisions. Such exercises are supposed to yield insights about how different players would act, and lay plain what sort of moves each group might make.

Becca Wasser, who helped design and lead the scenario, said that while many war games were conducted to study China, most focused on conventional military threats, giving short shrift to the many ways China could exert pressure on Taiwan.

And countering those pressure points could be difficult, especially if the United States and Taiwan were at odds over the best strategy. In the scenario, the U.S. team presumed the Taiwan team would go along with its strategies to counter China. But Taiwan’s interest sometimes led it to cross-purposes. For example, when the United States wanted to bring semiconductor engineers to the safety of America, Taiwan resisted, worried about a brain drain.

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“Whatever the United States tried to do by itself in the game really fell flat,” Ms. Wasser said. “We have seen a variety of examples of that in real life.”

As a result, multilateral responses and global efforts to build resiliency in the supply chain for computer chips are most likely the best strategy, the report said.

Taiwan has relied on its dominance of the microchip industry for its defense. The “silicon shield” theory argued that because its semiconductor industry is so important to Chinese manufacturing and the United States consumer economy, actions that threaten its foundries would be too risky.

Martijn Rasser, a co-author of the study and a former C.I.A. analyst, said it was crucial for the international community to convince Taiwan that its shield strategy needed to be internationalized. “The long-term play has to be a geographic dispersal of those capabilities out of Taiwan in exchange for enhanced security guarantees for the island,” he said.

The Biden administration has made clear that in the case of Ukraine, while the United States would economically punish Russia for any invasion, it would not commit troops to fight alongside Kyiv to stop any intervention by Moscow. The longstanding American policy toward Taiwan calls for shoring up its defenses and practicing strategic ambiguity over whether Washington would militarily intervene in a conflict over the island.

But Taiwan and its semiconductors are far more important to America’s economy than Ukraine is — meaning it would very likely be far more difficult for the United States to stay out of a conflict involving Taiwan.

Taiwan accounts for half of the overall production of microchips that are critical to the functioning of mobile phones, consumer electronics, cars, military equipment and more. South Korea, the nearest competitor, has about 17 percent of the overall market. But Taiwanese chips are the smallest and fastest, and its foundries account for 92 percent of the most advanced designs.

“It’s almost impossible to duplicate Taiwan’s manufacturing capability of high-end chips, of low-end chips,” said Dan Blumenthal, a scholar at the American Enterprise Institute. “It’s just the manufacturing hub of the world.”

Although the United States and Europe are trying to boost their own domestic design and production of semiconductors, they do not have the abilities to mass produce the most advanced designs that the Taiwan Semiconductor Manufacturing Company, or TSMC, can make.

“If the semiconductor supply chain is infringed upon by China in some way, all of the sudden the things that Americans look to in their daily lives, to get to and from work, to call their loved ones, to do a variety of different things, those disappear,” Ms. Wasser said.

Other experts said it would be an overstatement to say that the United States would be dragged into a war over microchips. China will decide what kinds of coercive measures it will take against the Taiwanese based on the perceived threat to its sovereignty and the expected international backlog, said Bonny Lin of the Center for Strategic and International Studies.

“China is not going to base their Taiwan policy, or any decision to use force against Taiwan, based on chips,” Dr. Lin said. “China thinks about the costs of an invasion of Taiwan — there are significant political and military costs. That is why I don’t think chips would figure among the top three factors of using military force against Taiwan.”

This Is How a War With China Could Begin

First, the lights in Taiwan go out.

TAIPEI, Taiwan — If the United States gets embroiled in a war with China, it may begin with the lights going out here in Taipei.

Tensions are rising across the Taiwan Strait, and there’s a growing concern among some security experts that Chinese President Xi Jinping might act recklessly toward Taiwan in the next few years, drawing the United States into a conflict.

Xi’s hard line toward Hong Kong is alarming Taiwanese and further reducing the chance, if there ever was any, of a peaceful unification of China. China seems to be abandoning its effort to win hearts and minds on Taiwan, and it has steadily improved military capabilities — thus prompting the fear that Xi might eventually use them.

“We are very concerned,” Taiwan’s foreign minister, Joseph Wu, told me. He said that one concern was that a slowing economy and other troubles in China might lead Xi to make trouble for Taiwan as a distraction. “This is the scenario that is constantly playing in the minds of the key decision makers” on Taiwan, he said.

The main worry of military planners here isn’t so much a full-scale amphibious invasion. Rather, they fear the mainland sowing chaos and disrupting the economy as a way of trying to bring Taiwan to heel.

Hence the concern aboutcyberattack that would take out Taipei’s electric grid. Or sabotage of the underwater cables that bring data and internet to Taiwan. Or interference in the South China Sea with tankers carrying oil to Taiwan.

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There is concern that troubles in China will lead it to interfere with Taiwan, such as staging a cyberattack on Taipei’s power grid.
CreditRitchie B Tongo/EPA, via Shutterstock

Wu added that China could also step up military pressure by increasing patrols in the area, or by holding military exercises. Even a partial blockade would have a substantial impact if it raised insurance costs and damaged confidence in the island’s future.

Government officials in Taiwan were cagey about how they would respond to provocations in cyber and other realms, but Wu said that military officials “are planning for defense and offense.” Another senior government official said that retaliation could include airstrikes on China’s Fujian Province.

That fits with the belief that Taiwan would promptly escalate to bring the war to China. If that happens, no one knows quite what the U.S. would do, including the U.S. itself. A 1979 American law suggests that the United States is committed to Taiwan’s defense, but the law is ambiguous about just how committed.

China has been vastly improving its military capabilities, including its ability to strike aircraft carriers. I’m told that in 18 of the last 18 Pentagon war games involving China in the Taiwan Strait, the U.S. lost. Still, that can be misleading, because the war games are much more limited than real life would be. For example, the United States could interrupt China’s oil supplies from the gulf.

Beijing has also been nibbling away at Taiwan’s international presence, blocking it from participating in the World Health Organization and other United Nations agencies, and even barring Taiwanese from taking tours of the U.N. and Taiwanese journalists from getting U.N. accreditation.

President Trump has generally been more supportive of Taiwan than his predecessors, and that’s worked well so far. But this has to be done very carefully. While Taiwan and China may know each other’s red lines, I worry that American politicians may try to help Taiwan in ways that increase the risk of triggering a crisis. Nothing can be so dangerous as a well-meaning American.

Aside from its efforts to isolate Taiwan, China also appears to be borrowing from the Russian playbook and using Facebook and other platforms to interfere with Taiwan’s democracy in the run-up to crucial elections in January.

“China is trying to discredit and dismantle Taiwan democracy,” said Ketty Chen of the Taiwan Foundation for Democracy.

A war between the United States and China over Taiwan would be a cataclysm. But it would also be a catastrophe if Taiwan were blockaded or squashed into submission, because it is a pillar of technology (the source of more than 90 percent of the most advanced computer chips), a pillar of democracy and an “unsinkable aircraft carrier” standing in the way of any Chinese projection into the Pacific or toward, say, Okinawa.

There are steps the U.S. can take that might reduce the risk of a crisis. Washington can emphasize to Beijing that Taiwan will not take any unilateral action, such as declaring itself an independent country — unless China makes a military move, in which case it will do so at once. The U.S. can also caution Beijing that if the electricity goes out in Taipei, the same may happen in Shanghai, and that if Taiwan-bound ships are harassed, they may be reflagged as American vessels.

But that means thinking through what might happen in the next few years and making clear to Xi that he will pay an extremely high price if he messes with Taiwan’s freedom.

Making China Great Again

As Donald Trump surrenders America’s global commitments, Xi Jinping is learning to pick up the pieces.

The hero, Leng Feng, played by the action star Wu Jing (who also directed the film), is a veteran of the “wolf warriors,” special forces of the People’s Liberation Army. In retirement, he works as a guard in a fictional African country, on the frontier of China’s ventures abroad. A rebel army, backed by Western mercenaries, attempts to seize power, and the country is engulfed in civil war. Leng shepherds civilians to the gates of the Chinese Embassy, where the Ambassador wades into the battle and declares, “Stand down! We are Chinese! China and Africa are friends.” The rebels hold their fire, and survivors are spirited to safety aboard a Chinese battleship.

.. For decades, Chinese nationalism revolved around victimhood: the bitter legacy of invasion and imperialism, and the memory of a China so weak that, at the end of the nineteenth century, the philosopher Liang Qichao called his country “the sick man of Asia.” “Wolf Warrior II” captures a new, muscular iteration of China’s self-narrative, much as Rambo’s heroics expressed the swagger of the Reagan era.

.. “In the past, all of our movies were about, say, the Opium Wars—how other countries waged war against China,” he said. “But Chinese people have always wanted to see that our country could, one day, have the power to protect its own people and contribute to peace in the world.”

.. For years, China’s leaders predicted that a time would come—perhaps midway through this century—when it could project its own values abroad. In the age of “America First,” that time has come far sooner than expected.

.. Trump often portrays America’s urgent task as one of survival. As he put it during the campaign, “At what point do you say, ‘Hey, we have to take care of ourselves’? So, you know, I know the outer world exists and I’ll be very cognizant of that, but, at the same time, our country is disintegrating.”
.. China’s approach is more ambitious. In recent years, it has taken steps to accrue national power on a scale that no country has attempted since the Cold War, by increasing its investments in the types of assets that established American authority in the previous century: foreign aid, overseas security, foreign influence, and the most advanced new technologies, such as artificial intelligence.
.. It has become one of the leading contributors to the U.N.’s budget and to its peacekeeping force, and it has joined talks to address global problems such as terrorism, piracy, and nuclear proliferation.
.. This was an ironic performance—for decades, China has relied on protectionism—but Trump provided an irresistible opening. China is negotiating with at least sixteen countries to form the Regional Comprehensive Economic Partnership, a free-trade zone that excludes the United States, which it proposed in 2012 as a response to the T.P.P. If the deal is signed next year, as projected, it will create the world’s largest trade bloc, by population.
.. By setting more of the world’s rules, China hopes to “break the Western moral advantage,” which identifies “good and bad” political systems
.. Meng Hongwei, a Chinese vice-minister of public security, became the first Chinese president of Interpol, the international police organization; the move alarmed human-rights groups, because Interpol has been criticized for helping authoritarian governments target and harass dissidents and pro-democracy activists abroad.

.. Moreover, China’s economic path is complicated by heavy debts, bloated state-owned enterprises, rising inequality, and slowing growth. The workers who once powered China’s boom are graying.

.. In 2000, the U.S. accounted for thirty-one per cent of the global economy, and China accounted for four per cent. Today, the U.S.’s share is twenty-four per cent and China’s fifteen per cent.

.. in the past we were used to going to the White House to get our work done,” Shivshankar Menon, India’s former foreign secretary and national-security adviser to the Prime Minister, told me. “Now we go to the corporations, to Congress, to the Pentagon, wherever.”

.. everybody else in the world will look around and say, I want to be friends with both the U.S. and the Chinese—and the Chinese are ready, and I’ll start with them.”

.. He presented China as “a new option for other countries,” calling this alternative to Western democracy the zhongguo fang’an, the “Chinese solution.”

.. The state press ran a profile of Xi that was effusive even by the standards of the form, depicting him as an “unrivalled helmsman,” whose “extensive knowledge of literature and the arts makes him a consummate communicator in the international arena.”

.. Xi has inscribed on his country a rigid vision of modernity. A campaign to clean up “low-end population” has evicted migrant workers from Beijing, and a campaign against dissent has evicted the most outspoken intellectuals from online debate.

.. Foreign universities with programs in China, such as Duke, have been advised that they must elevate a Communist Party secretary to a decision-making role on their local boards of trustees.

.. The Party is encouraging dark imaginings about the outside world: posters warn the public to “protect national secrets” and to watch out for “spies.”

.. Last June, Yao Chen, one of China’s most popular actresses, received a barrage of criticism online after she tried to raise awareness of the global refugee crisis. (She was forced to clarify that she was not calling for China to accept refugees.)

.. In Rao’s view, Trump’s “America First” slogan is an honest declaration, a realist vision stripped of false altruism and piety.

.. “In this world, power speaks,” he said, making a fist, a gesture that Trump adopted in his Inauguration speech and Xi displayed in a photo taken at the start of his new term.

.. “I think Trump is America’s Gorbachev.” In China, Mikhail Gorbachev is known as the leader who led an empire to collapse. “The United States will suffer,” he warned.

.. In 1991, when Bush, Sr., launched the war against Iraq, it got thirty-four countries to join the war effort. This time, if Trump launched a war against anyone, I doubt he would get support from even five countries.

.. For Chinese leaders, Yan said, “Trump is the biggest strategic opportunity.” I asked Yan how long he thought the opportunity would last. “As long as Trump stays in power,” he replied.

.. When Trump won, the Party “was in a kind of shock,”

.. “They feared that he was their mortal enemy.” The leadership drafted potential strategies for retaliation, including threatening American companies in China and withholding investment from the districts of influential members of Congress.

.. Before he entered the White House, China started assembling a playbook for dealing with him.

.. “China knows Trump can be unpredictable, so we have weapons to make him predictable, to contain him. He would trade Taiwan for jobs.”

.. there were two competing strategies on China. One, promoted by Stephen Bannon, then the chief strategist, wanted the President to take a hard line, even at the risk of a trade war. Bannon often described China as a “civilizational challenge.” The other view was associated with Jared Kushner, Trump’s son-in-law and adviser, who had received guidance from Henry Kissinger and met repeatedly with the Chinese Ambassador, Cui Tiankai. Kushner argued for a close, collegial bond between Xi and Trump, and he prevailed.

.. While Xi was at the resort, the Chinese government approved three trademark applications from Ivanka’s company, clearing the way for her to sell jewelry, handbags, and spa services in China.

.. During the transition, Kushner dined with Chinese business executives while the Kushner Companies was seeking their investment in a Manhattan property.

.. In May, Kushner’s sister, Nicole Kushner Meyer, was found to have mentioned his White House position while she courted investors during a trip to China.

.. During the Mar-a-Lago meetings, Chinese officials noticed that, on some of China’s most sensitive issues, Trump did not know enough to push back.

.. “Trump is taking what Xi Jinping says at face value—on Tibet, Taiwan, North Korea,”

.. “The Chinese felt like they had Trump’s number,” he said. “Yes, there is this random, unpredictable Ouija-board quality to him that worries them, and they have to brace for some problems, but, fundamentally, what they said was ‘He’s a paper tiger.’ Because he hasn’t delivered on any of his threats. There’s no wall on Mexico. There’s no repeal of health care. He can’t get the Congress to back him up. He’s under investigation.”

.. a Beijing think tank, published an analysis of the Trump Administration, describing it as a den of warring “cliques,” the most influential of which was the “Trump family clan.”

.. The Trump clan appears to “directly influence final decisions” on business and diplomacy in a way that “has rarely been seen in the political history of the United States,” the analyst wrote. He summed it up using an obscure phrase from feudal China: jiatianxia—“to treat the state as your possession.”

China Mistakenly Challenges Andrew Jackson to a Duel

China Mistakenly Challenges Andrew Jackson to a Duel USS Ronald Reagan and ships of Carrier Strike Group 5 transit the Pacific Ocean in June 2017.

A Chinese diplomat’s insulting words invite a vigorous response from the U.S. The United States Navy will be making a port call in Taiwan in the near future. The only questions that remain are where, when, and how many ships of what type will drop anchor or tie up at Taiwanese piers. Of course, this may cause a war to break out in Asia, but it won’t be one of the United States’ making. We owe this troubling possibility to a China whose rising sense of anticipatory greatness is at odds with its capacity to execute a successful war. Hubris stimulated a Chinese official, Li Kexin, who is attached to its embassy in Washington, D.C., to threaten war against the United States. Li was responding to fairly normal language within the 2018 National Defense Authorization Act that allowed for mutual port visits between American and Taiwan naval vessels. In response, Li stated: “The day that a U.S. Navy vessel arrives in Kaohsiung [Taiwan’s main deep-water port] is the day that our People’s Liberation Army unifies Taiwan with military force.”

Under these conditions, the United States has no choice but to send the United States Navy to Taiwan for a port visit, and to do so in a big way. The USS Ronald Reagan, a Nimitz-class super carrier based in Japan, with its entire embarked air wing of 65 strike fighters and reconnaissance aircraft and its accompanying escort strike group of Ticonderoga-class Aegis cruisers and Arleigh Burke-class ballistic-missile-defense destroyers, should quickly sortie to Taiwan. They should divide up, with one portion of the strike group transiting down the strait that separates the island from China and the other coming down the eastern coast, meeting up at the southern tip to escort the Reagan into port at Kaohsiung. At that point, the other strike-group ships should either take up station north and south of Taiwan, with their Aegis radars at full alert given the nature of Mr. Li’s threat, or rotationally enter other ports in Taiwan for friendly port visits. The Ohio-class guided-missile submarine Michigan, carrying 154 Tomahawk missiles, should also make an appearance, before quietly disappearing into the depths to continue its lonely patrols. Such a move would be an effective demonstration of American naval coercive diplomacy worthy of Theodore Roosevelt.

.. Additionally, the United States should consider a robust, healthy defensive-arms sale package for Taiwan in the coming year. Surface ships and fighter aircraft, top-of-the-line fifth-generation stealth fighters, should be part of the package,

..All of this will be viewed by China as escalatory, and it should be, but the Chinese must be reminded that it was their intemperate language that started the upwards climb.

.. Walter Russell Mead identified four schools of U.S. foreign policy; the

  1. pro-business Hamiltonians, the
  2. liberal-order Wilsonians, the
  3. realist Jeffersonians, and the
  4. mercurial, exceptionalist Jacksonians.

The election of President Donald Trump signaled the return of the Jacksonian impulse for the first time in a generation

.. And when it comes to war? Mead states that “when an enemy attacks, Jacksonians spring to the country’s defense” viscerally, and Jacksonians, like their namesake Andrew Jackson, will not stop until honor is satisfied. It is a dangerous impulse to stimulate, as China’s Li Kexin has done. China owes the United States a public apology. It now needs to accept a U.S. Navy port visit to Taiwan with a minimum of protests

.. Jerry Hendrix is a retired U.S. Navy captain, an award-winning naval historian ..

Trump has been making ominous threats his whole life

The crisis we now find ourselves in has been exaggerated and mishandled by the Trump administration to a degree that is deeply worrying and dangerous.

From the start, the White House has wanted to look tough on North Korea.

.. In the early months of President Trump’s administration, before there could possibly have been a serious policy review, Secretary of State Rex Tillerson warned that the era of strategic patience with North Korea was over.

.. Last week, national security adviser H.R. McMaster said that North Korea’s potential to hit the United States with nuclear weapons was an “intolerable” threat. Not North Korea’s use of weapons, mind you; just the potential.

.. So why do it? Because it’s Trump’s basic mode of action. For his entire life, Trump has made grandiose promises and ominous threats — and rarely delivered on any.

When he was in business, Reuters found,

  • he frequently threatened to sue news organizations for libel, but the last time he followed through was 33 years ago, in 1984.
  • Trump says that he never settles cases out of court. In fact, he has settled at least 100 times, according to USA Today.

..In his political life, he has followed the same strategy of bluster.

  • In 2011, he said that he had investigators who “cannot believe what they’re finding” about President Barack Obama’s birth certificate, and that he would at some point “be revealing some interesting things.” He had nothing.
  •  During the campaign, he vowed that he would label China a currency manipulator,
  • move the U.S. Embassy in Israel to Jerusalem,
  • make Mexico pay for a border wall and
  • initiate an investigation into Hillary Clinton. So far, nada.
  • After being elected, he signaled to China that he might recognize Taiwan. Within weeks of taking office, he folded.
  • He implied that he had tapes of his conversations with then-FBI Director James B. Comey. Of course, he had none.

Does he think the North Koreans don’t know this?

.. The secretary of state seems to have been telling Americans — and the world — to ignore the rhetoric, not of the North Korean dictator, but of his own boss, the president of the United States. It is probably what Trump’s associates have done for him all his life. They know that the guiding mantra for him has been not the art of the deal, but the art of the bluff.

China Goes Soft on U.S. Sanctions over North Korea, Condemns Arms Sale to Taiwan

The Chinese government appears to be reserving its ire towards the United States for its response to a recent arms sale to Taiwan, keeping its commentary limited on new U.S. Treasury sanctions against the Bank of Dandong for its ties to North Korea.

The U.S. Treasury announced Thursday that evidence shows the Bank of Dandong “acts as a conduit for illicit North Korean financial activity,” including money laundering and, as such, would be banned from the U.S. financial system.

Trump’s Retreat From Populism

The Trump administration is in full retreat from its array of right-wing populist promises.

Instead of scrapping NAFTA, they are merely looking for minor adjustments. Instead of showing China who’s boss, they have retreated on Taiwan, and are promising a far more favorable stance on trade in exchange for whatever help China might offer on North Korea — while telegraphing that they know help is bound to be limited.

.. Most dramatically, Trump reversed the overwhelming thrust of his campaign with respect to foreign policy, ordering an attack on Syria and welcoming Montenegro into NATO, saying that the Atlantic alliance is “no longer obsolete.”

.. Most dramatically, Trump reversed the overwhelming thrust of his campaign with respect to foreign policy, ordering an attack on Syria and welcoming Montenegro into NATO, saying that the Atlantic alliance is “no longer obsolete.”

Faced with any difficult problem, he chooses the easiest way out, which in politics will mean appeasing whoever presents the most current threat.