Taiwan Semiconductor: How Taiwan Differs From Ukraine

[Daniel Nenni]

Probably the most thoughtful post I have read on SA yet. 99% is garbage so here is the 1%:

Summary

• -Russia’s invasion of Ukraine casts a pall over TSMC’s excellent Q1 results.
• -America’s difficult balancing act concerning Taiwan.
• -U.S. and Chinese economic interests in Taiwan.
• -Would the U.S. come to Taiwan’s defense? Would it need to?
• -Investor takeaways.
• 
  
• Investor takeaways

All of this is by way of trying to demonstrate that Taiwan's defense situation is very different from Ukraine's. This is not to say that there is zero risk of P.R.C. military action against Taiwan. There has never been zero risk.

But since 1949, China has not been willing to attempt a conquest of Taiwan, and the reasons are mainly geography and the role of the United States as a de facto ally of Taiwan. Those key factors are still very much in force today.

As an investor in TSMC, I don't lose any sleep over the P.R.C. invading Taiwan. There's no outcome of an invasion where China benefits. There's really no military action that China could take that would not risk severe damage to Taiwan's industry and infrastructure. That damage would just ripple back into the mainland economy.

With so little to gain and a lot to lose, the risk/reward calculation favors the P.R.C. doing nothing to alter the status quo. Current perceptions of Taiwan's vulnerability are misplaced, and TSMC has become a bargain as a result. I remain long TSMC and rate it a Buy.

https://seekingalpha.com/article/4502763-taiwan-semiconductor-manufacturing-company-how-taiwan-differs-from-ukraine

 

[Xebec]

If China invaded Taiwan, the impact to TSMC shares would be not much worse than almost everything else..

 

[Daniel Nenni]

If China invaded Taiwan, the impact to TSMC shares would be not much worse than almost everything else..

Personally I think an attack on Taiwan from any country would be catastrophic in all regards. The silicon shield is real so I don't lose sleep over it either. We call it "cut off your nose despite your face". China would not look good without a nose.

 

[smeyer0028]

I think this FT story on China needing western Covid-19 vaccines is
signifcant. China needs portals to the west. There will be tension
but I do not think China will make the same mistake as Putin to
get involved in a long economy weakening war.

Scientists urge China to replace its faltering Covid vaccines

Omicron outbreak in Shanghai has refocused attention on waning efficacy of homegrown jabs

www.ft.com

 

[Portland]

The atrocities in mariupol are really bad and aren't getting the attention it deserves.

 

[tonyget]

I think this FT story on China needing western Covid-19 vaccines is
signifcant. China needs portals to the west. There will be tension
but I do not think China will make the same mistake as Putin to
get involved in a long economy weakening war.

Scientists urge China to replace its faltering Covid vaccines

Omicron outbreak in Shanghai has refocused attention on waning efficacy of homegrown jabs

www.ft.com

Forget about it. China will never approve the use of western vaccines, regardless how covid situations evolve in China

 

[Xebec]

Personally I think an attack on Taiwan from any country would be catastrophic in all regards. The silicon shield is real so I don't lose sleep over it either. We call it "cut off your nose despite your face". China would not look good without a nose.

Let us hope that the leaders of nations stay rationale then.. There are plenty of historical examples of warhawks entering or influencing leaders to enter unwinnable situations.

 

[Daniel Nenni]

Forget about it. China will never approve the use of western vaccines, regardless how covid situations evolve in China

Agreed. As it stands today China is learning to live without us. A better US strategy would be for China to learn to depend on us. Taiwan has perfected this with semiconductors and the silicon shield. The world literally depends on Taiwan for semiconductors. World economies would crash without an independent Taiwan.

Taiwan Silicon Shield Increases

Localization of Chip Manufacturing Rising. Taiwan to Control 48% of Global Foundry Capacity in 2022 April 25, 2022 06:00 AM Eastern Daylight Time TAIPEI, Taiwan--(BUSINESS WIRE)--According to TrendForce, Taiwan is crucial to the global semiconductor supply chain, accounting for a 26% market...

semiwiki.com

 

[Zaim]

I think Taiwan case and Ukraine case are much different. Actually, there are not much similarities between the two cases.
Firstly, world is not so critically dependent on Ukraine as compared to its dependency on the TSMC of Taiwan. Furthermore, the degree of that critical dependence on the TSMC chip manufacturing capability has increased considerably through the recent EV manufacturing and autonomous drive boom.
Secondly, Taiwan and the US are allies and they have some agreements signed for mutual defence. If there is an assault on Taiwan it means declaring war with the US directly.
....

 

[Paul2]

I think Taiwan case and Ukraine case are much different. Actually, there are not much similarities between the two cases.
Firstly, world is not so critically dependent on Ukraine as compared to its dependency on the TSMC of Taiwan. Furthermore, the degree of that critical dependence on the TSMC chip manufacturing capability has increased considerably through the recent EV manufacturing and autonomous drive boom.
Secondly, Taiwan and the US are allies and they have some agreements signed for mutual defence. If there is an assault on Taiwan it means declaring war with the US directly.
....

I would say Taiwan is significantly worse off than Ukraine.

1. 1. It's an island
2. 2. Ukraine only managed to get world's attention thanks to it being on NATO's doorstep
3. 3. Taiwan is an obscure island most Western politicians wouldn't know how to find on a map
4. 4. The West has show itself not able to mobilise even in the face of a total disaster scenario which CoVID could've been. Losing 90% of world' microchips can't be called a life or death problem for people who can't tell microchips from potato chips.
5. 5. Weak Western reaction on Ukraine has only emboldened China. They now think "If we would be more assertive than Putin, than we will get away with this"

 

[jmlobert]

If China doesn't get deterred by the global action against Russia and wanted to annex Taiwan, I don't think there would be a military strike against Taiwan. This would be a surgical procedure with specialty teams going in and taking out the government overnight, replacing it with a Chinese one. There would likely not be a single cannon shot fired, only an announcement that Taiwan is now a full prefecture of China... Do not underestimate China's power and hunger for more power. If they really wanted this, they would simply take it. Seeing the potential fallout on the economy and isolation, they choose not to do this. At this time.

 

[VCT]

I would say Taiwan is significantly worse off than Ukraine.

1. 1. It's an island
2. 2. Ukraine only managed to get world's attention thanks to it being on NATO's doorstep
3. 3. Taiwan is an obscure island most Western politicians wouldn't know how to find on a map
4. 4. The West has show itself not able to mobilise even in the face of a total disaster scenario which CoVID could've been. Losing 90% of world' microchips can't be called a life or death problem for people who can't tell microchips from potato chips.
5. 5. Weak Western reaction on Ukraine has only emboldened China. They now think "If we would be more assertive than Putin, than we will get away with this"

Island is actually a lot harder to invade. Only a certain part of Taiwan coast is good for landing.

 

[soAsian]

I would say Taiwan is significantly worse off than Ukraine.

1. 1. It's an island
2. 2. Ukraine only managed to get world's attention thanks to it being on NATO's doorstep
3. 3. Taiwan is an obscure island most Western politicians wouldn't know how to find on a map
4. 4. The West has show itself not able to mobilise even in the face of a total disaster scenario which CoVID could've been. Losing 90% of world' microchips can't be called a life or death problem for people who can't tell microchips from potato chips.
5. 5. Weak Western reaction on Ukraine has only emboldened China. They now think "If we would be more assertive than Putin, than we will get away with this"

if China hold Taiwan, they got a choke hold on Japan. the ocean is wide open for Chinese.

 

[Portland]

I don't get the lack of concern about China and russia. Russia doesn't match up against Ukraine very well but to be honest they could occupy Poland or Germany in a week and there isn't a lot we could do because of logistics.

 

[soAsian]

Island is actually a lot harder to invade. Only a certain part of Taiwan coast is good for landing.

and only few months in a year where the ocean won't swallow you up. China crossing that 111 miles going to be a problem for the Chinese. Taiwan is changing their military doctrine with missile defenses and new home build submarine w/help from US and others.

we'll see how it all play out if Chinese do invade

 

[bill01]

I don't get the lack of concern about China and russia. Russia doesn't match up against Ukraine very well but to be honest they could occupy Poland or Germany in a week and there isn't a lot we could do because of logistics.

If this war has shown us anything, it is that Russia in fact definitely could not occupy Poland or Germany, let alone both of them in a week. They have struggled with massive logistical issues within a stones throw of their border. What makes you think they could strike hundreds of miles deep in NATO territory with that kind of speed?

China is a different beast entirely and we have not seen how effective Chinese forces would be in real combat, I would assume that that they would be more supported logistically (having learned from Ukraine), but you know what they say about assumptions...

 

[Paul2]

If this war has shown us anything, it is that Russia in fact definitely could not occupy Poland or Germany, let alone both of them in a week. They have struggled with massive logistical issues within a stones throw of their border. What makes you think they could strike hundreds of miles deep in NATO territory with that kind of speed?

China is a different beast entirely and we have not seen how effective Chinese forces would be in real combat, I would assume that that they would be more supported logistically (having learned from Ukraine), but you know what they say about assumptions...

But it showed, USA only acted when its hand was tied by Biden's rating going below the sea level.

It missed the optimal resupply period.

If US lets China blockade Taiwan without declaring a war, and nuclear striking Beijing first, then resupplying an island will be extremely hard.

 

[hist78]

I would say Taiwan is significantly worse off than Ukraine.

1. 1. It's an island
2. 2. Ukraine only managed to get world's attention thanks to it being on NATO's doorstep
3. 3. Taiwan is an obscure island most Western politicians wouldn't know how to find on a map
4. 4. The West has show itself not able to mobilise even in the face of a total disaster scenario which CoVID could've been. Losing 90% of world' microchips can't be called a life or death problem for people who can't tell microchips from potato chips.
5. 5. Weak Western reaction on Ukraine has only emboldened China. They now think "If we would be more assertive than Putin, than we will get away with this"

1. It's an island.

Taiwan Straits and the high mountains (about 2/3 of Taiwan) make any invasion ten times difficult, regardless it's from sea or from air or both. And if we look the difficulties Russia has been facing since they invaded Ukraine from land by trucks, people will learn immediately the invasion into Taiwan is much much difficult.

2. Ukraine only managed to get world's attention thanks to it being on NATO's doorstep.

Taiwan doesn't have such issue.

3. Taiwan is an obscure island most Western politicians wouldn't know how to find on a map

I don't know it in Europe, but it's not the case in the United States at all. Most Taiwan friendly legislations (such as the Taiwan Relation Act and recent Chips Act) got broadly and bipartisan support, sometimes zero objection, from both the senators and congressmen.

• 4. The West has show itself not able to mobilise even in the face of a total disaster scenario which CoVID could've been. Losing 90% of world' microchips can't be called a life or death problem for people who can't tell microchips from potato chips.

I'm wondering if you follow the news recently? The West has mostly opened after the peak of Covid-19. In US the economy is way too hot. Many businesses are not getting enough employees. US Federal Reserve started rasing interest rate to cool down the economy and inflation.

Yet Mainland China is facing serious economic stress and hopelessly fighting Covid-19 everywhere without using those best vaccines available to protect human life. Current Shanghai's lockdown is a horrible tragedy and a vivid evidence about it.

5. Weak Western reaction on Ukraine has only emboldened China. They now think "If we would be more assertive than Putin, than we will get away with this"

I can say Western's reaction to Russian invasion is insufficient but I won't call it weak. It's probably suitable for a discussion at another place instead of here in Semiwiki.

Since President Obama administration, US has started so called "Pivot to Asia" policy. The military, political, and economical coorporations and activities between US and Asian allies (including Taiwan, Japan, Korea, Philippines, Australia, and India) have been enhanced and expanded. It even brought UK, French, German, and Dutch navy into South China Sea and East China Sea.

If China invades Taiwan, they will be fighting against the world. Luckily and hopefully CCP knows it.

 

[Portland]

If this war has shown us anything, it is that Russia in fact definitely could not occupy Poland or Germany, let alone both of them in a week. They have struggled with massive logistical issues within a stones throw of their border. What makes you think they could strike hundreds of miles deep in NATO territory with that kind of speed?

China is a different beast entirely and we have not seen how effective Chinese forces would be in real combat, I would assume that that they would be more supported logistically (having learned from Ukraine), but you know what they say about assumptions...

Russia's not weak Ukraine did an amazing job defending their country. The Europeans with any common sense are thankful the problem is Russia invading Ukraine and not Russia is occupying Ukraine and who's next. Holding an anti-tank weapon, aim it, and fire it is a lot harder than you realize. It is prohibitively expensive to train someone and Ukraine had squads taking out rows of armor vehicles.

Germany is a weird issue because of the two echo chambers of being the greatest country ever or trash. I think both points of view are ridiculous.

 

[coldsolder215]

Russia lashed out after being backed into a corner by NATO and relegated to a peripheral role in the world order, this after being a global superpower for more than half a century. Meanwhile China has been underwriting both the global manufacturing economy and the US Treasury for the last half century, and can simply keep doing what they've been doing while the west continues to crumble. We are 6 months away from a historic midterm electoral slaughter, after which the next 2 years of American politics will be confined to the nuances of Hunter Biden's laptop. What an exciting time for the CCP.