China vs. US & Taiwan: A Real RISK?! What This War Game Tells Us!!

Taiwan could become the next global Flashpoint the potential front line in a Conflict between china and the us Now while some may think this has to do With politics and history the far Broader impetus is economic taiwan is a Critical cog in the global economy given Its role in the production of Semiconductors and he who controls the Means of production effectively controls The world’s supply of well Everything from cars to phones super Computers to super weapons That’s why earlier this year an american Think tank ran a war game that pitted The us and china against each other in a Hypothetical battle for control It’s an incredibly insightful study and What it reveals is quite chilling so That’s exactly what i’ll be covering Today don’t go anywhere [Music] In order to understand the importance of Taiwan to the world economy you need to Know a bit more about the global Semiconductor industry Now as you know semiconductors are a Vital component of nearly all electronic Devices that’s because they’re used to Manufacture the chips that go into cars Planes fridges computers phones you name It When it comes to the semiconductor Supply chain it’s highly dependent on

Just a few key players And in the case of the most advanced Chips that go into phones and Supercomputers it all comes down to one Company That company is called taiwan Semiconductor manufacturing company or Tsmc As the name would suggest it’s a Semiconductor manufacturer And that’s a key point because although Other companies may develop chips for Their devices they outsource the actual Manufacturing to tsmc Now tsmc and other companies like it are Sometimes called fabs fabrication plants Or foundries Some of the biggest companies in the World including apple use foundries like Tsmc I should also add that making these Chips is incredibly expensive and Involves a highly specialized process Tsmc and taiwan more broadly have honed The technique and the technology which Puts them decades ahead of the Competition This makes it a lot more cost effective For companies to use foundries than to Try and actually do it themselves The problem is that a lot of companies Have come to depend On tsmc and by a lot i mean A lot

When it comes to market share for global Foundries tsmc controls 53 of it the Next closest competitor is samsung with Only 16.3 percent i’ll also add that umc Which comes in just behind samsung on This list produces 6.9 of the supply and Is also a taiwanese company So what this shows is that there is an Incredible amount of centralization in The chip manufacturing industry and this Centralization is a huge problem We saw just how much of a problem it was During the pandemic when the Vulnerabilities of global supply chains Were laid bare People learned how reliant electronics Manufacturers in the west were on these Taiwanese chips by some estimates the Chip shortage triggered by the pandemic Cost the u.s economy 240 Billion dollars in 2021. It also illustrated how little the u.s Has invested in its own semiconductor Industry whereby some estimates only 12 Percent of its demand is met by domestic Supply This provided the impetus for that chips Bill that was recently passed Now of course it’s not just the u.s That’s highly dependent on those chips Coming out of taiwan So too are the chinese Although china manufactures Semiconductors through its smic company

These are of the less sophisticated kind China needs those highly advanced chips That come from tsmc But due to sanctions on a lot of its Tech industry by the us Beijing has been actively looking to Build out its own advanced semiconductor Industry and has been doing so by Poaching top talent from taiwan this is Particularly concerning especially when It comes to the us designs and ip that Are being held at tsmc Access to the ip and know how to build These chips could give china an edge Over the us But it’s still a slow process albeit With an obvious shortcut China would absolutely relish the idea Of being able to take over taiwan’s Chip-making ability Yes there are historical and political Reasons as to why china wants to retake Taiwan but it’s the benefits that come From controlling the global chip supply That are arguably most alluring for Beijing Only a few days ago a top government Economist urged china to seize tsmc if There was ever a situation in which the U.s was to place sanctions on the Country and if china were to do that it Wouldn’t only get the most amazing Technological edge in the world but Would also all the other

Countries that are reliant on taiwanese Chips To quote a former u.s deputy defense Secretary quote we are 110 miles away From going from two generations ahead to Maybe two generations behind It’s a really precarious situation Especially given that these chips are Vital to the production of sophisticated Weaponry You can’t go to war with china if most Of your military assets can’t be built There are also those concerns about the Large-scale theft of the ip that these Taiwanese companies hold this is why i Think that if china were to attempt to Take taiwan it wouldn’t do so under a Hail of missiles they don’t want to kill The golden goose But this is something that we’ll look at More in just a sec now for its part Taiwan is not oblivious to the role that Its semiconductor industry plays in the World It knows that this is part of the reason Why the u.s would still consider Defending taiwan in the event of a Chinese invasion it’s also why tsmc and The other manufacturers have been Relatively reluctant to set up fabs in Other countries Not only is it more expensive to set up These fab plants abroad but doing so Would lessen the strategic importance

That taiwan has On the flip side taiwan also knows that Beijing wouldn’t be likely to want to Destroy the industry in a conflict That’s one of the main reasons why Taiwan has been so keen to do business With china any disruption to the supply Chain in an all-out war on the island Would also bring china’s electronics Manufacturing industry to a halt Perhaps this is why the taiwanese prefer The status quo of quote strategic Ambiguity They’re straddling a delicate line in a Game of brinksmanship where their Semiconductor industry is the ultimate Prize Now of course things have taken a more Dramatic turn for the country more Recently and that is because of a number Of factors Firstly china is more vulnerable at home I’ve talked about some of the economic Challenges facing the country in my Video on bank runs which i’ll leave in The description for you but basically Ccp leaders need to distract attention From this and retaking taiwan would be The ultimate boost to national pride we Should also not forget that president xi Jinping is angling for re-election to an Unprecedented third term and cannot Afford to appear weak Then there’s also the fact that the

Taiwanese themselves have become a lot More skeptical of china’s intentions That’s thanks to china’s actions over Hong kong where it has effectively Crushed pro-democracy protests and Completely neutered the one country two Systems policy And finally there was last week’s visit By nancy pelosi to the island she became The highest-ranking u.s government Official to visit taiwan in over 25 Years This was seen as a major slight by the Chinese and caused them to further Question the us’s ultimate aims Regarding taiwan So this is the backdrop to the current Taiwan crisis and it’s even more Interesting given that numerous possible Scenarios were modeled in a war game Earlier this year so Let’s take a look at them The war game was called quote when the Chips are down gaming the global Semiconductor competition i’ll leave a Link to this report in the description Should you want to come back to it Now it was a virtual strategy game that Took place back in april and was Conducted by the center for a new American security cenas a think tank Based in washington dc The game was played to better understand How china could attempt to influence

Control over taiwan’s semiconductor Industry including the strategic Competition of the united states The game scenario took place in january Of 2025 and there were three teams Representing the main players red team For china blue for the us and green for Taiwan Here you can see the teams as well as The general order and their specific Objectives in the game and in order to Implement their strategy over the year The teams developed a set of diplomatic Informational military economic and Civil actions Now i won’t go over them here as it’s Quite a comprehensive list you can see It here in this appendix i think that These potential actions are particularly Relevant right now given that some of Them have already been deployed in Recent days So this war game was played and numerous Different variables were measured these Included Public sentiment you can’t win a war Long term unless you win hearts and Minds Technology levels arguably the economic Crown jewel Health self-explanatory Output of global chip supplies And demand for said supplies The game was played for a total of four

Years and you can see what the results Look like over here on this game chart Now i know this may look a bit cluttered And hard to read but what’s important to Get is the moves that were taken by the Players as they helped to give us some Key insights into what could actually Happen in real life Firstly taiwan knows that it is in an Indispensable position at the center of The global chip industry as i mentioned Earlier the world’s dependence on Taiwan’s chips acts as an inherent Security mechanism This is called the quote silicon shield That taiwan puts up This makes up for the shortcomings that Exist with the taiwan relations act Essentially a foreign policy of Strategic ambiguity By the way if you want a bit more of an Overview of this relations act then i’ll Leave a link to some sources in the Description for you it is well worth Your time Anyways in the game taiwan’s position Bolsters taipei’s diplomatic access and Leverage at the international Negotiating table however with a Revisionist china growing assertive this Shield Is looking more like an albatross that’s Because beijing knows the importance of The technological edge that comes with

Control of these chip manufacturers While china is involved in luring Semiconductor engineers and stealing Vital technologies from taiwan the eu And the us are courting tsmc to boost Production in their countries The only problem with this which was Illustrated in the actions of the green Team in the game is that any erosion of Tsmc’s market share or production in Taiwan weakened its silicon shield Yes it was a prize for the chinese but Without this shield there would be no Western assistance and china would have No qualms about reclaiming taiwan viewed By beijing as merely a province of china However the green team was also aware That china’s manufacturing of its own Ships was another threat to the Dominance and hence security of their Own chip industry So in the game they sought to increase China’s dependence on tsmc’s chips Taiwan also sought to give as many Actors as possible a stake in its Semiconductor industry including European nations This further enhances those implicit Security guarantees Quick side note here it is true that Tsmc has agreed to set up foundries in Europe and the us but the technology to Be used in those foundries is at least Two generations behind that used at the

Cutting edge plants in taiwan Now something else that the game Illustrated is that the constant Narrative and prognostications of a hot War between china and taiwan neglect a Number of other tactics that the ccp Could employ These include what are called quote gray Zone tactics These are defined as quote ambiguous Political economic informational or Military actions that primarily target Domestic or international public opinion And are employed to advance a nation’s Interests while still aiming to avoid Retaliation escalation or third-party Intervention In the game the red team china leveraged These instruments in order to gain Control of taiwan’s semiconductor Industry and affect u.s and global Access to these semiconductors They also leveraged various forms of Economic statecraft such as provisional Access to chinese markets financial Institutions and supply chains Moreover they hit taiwan with more Punitive actions such as restrictions on Their agricultural and tourist exports On that point i should also note that in Response to pelosi’s visit china plans To ban all imports that are labeled with Roc or republic of china which is what China refers to taiwan as

This could include a whole swathe of as Yet undetermined goods It’s also economically damaging for Taiwan given that it runs a close to 12 Billion trade surplus Anywho something else that the red team Did in the game is that they tried to Acquire strategic stakes in companies Like tsmc and dutch company asml For those who haven’t heard of it asml Is another vital company in the Semiconductor industry That’s because they are one of the few Producers of advanced lithography Machines These machines can cost more than 200 Million dollars and they are used in the Production of these chips Speaking of which the us is actively Lobbying the dutch government to ban Exports of machines from asml to the Chinese shows just how important this Company is in the overall supply chain Back to the game though where the red Team paired their more punitive measures With diplomatic and informational Tactics They included things such as Preferential trade agreements and Complex disinformation campaigns to Shape the narrative and alter the Public’s perception This is something that has of course Already been happening china has been

Trying to forge at least 10 free trade Agreements with eight more under Consideration It’s also been trying to blame covert Outbreaks on tsmc plants And here’s a fun fact for you it’s Estimated that china produces Approximately 450 million planted social Media comments Every year Now i guess the broader point here is That the gameplay was able to illustrate That china was able to achieve its Strategic goals using a vast array of Practices that didn’t involve actual Military operations against taiwan Moreover in the game that military power Was only ever used to buttress economic Objectives or as a distraction tactic To quote the research piece quote Military tools were widely viewed by the Red team as to blunt an instrument when Other forms of coercion would achieve Their aims more easily without risking Blowback Moving on though the war game also Illustrated a lack of alignment between The u.s and taiwan on semiconductors The blue team us wanted to onshore its Own chip manufacturing capacity and Taiwan wanted to keep the u.s reliant on Tsmc These divergent goals in the game Further complicated the relationship

In the game there were repeated attempts At information sharing and onshoring of These tsmc fabs in the u.s These negotiations failed and led to Fissures in the relationship between the Two countries This actually happened more recently in Real life when the founder of tsmc Pooh-poohed the attempts of the u.s to Become self-sufficient in semiconductors He also turned down the us’s request for More sensitive information on the Manufacturing process Now the war game was further complicated By the injection of other countries into The game to add further dynamics to it These were countries that also play Pivotal roles in the chip manufacturing Sector including the likes of south Korea japan and the netherlands As i mentioned earlier one move by the Red team was to try and acquire a share Of the dutch company asml This lack of alignment between the United states other countries and taiwan Created significant vulnerabilities that China was able to effectively exploit The red team did this by driving wedges Between the u.s taiwan and other nations For example they provided economic and Educational incentives to recruit talent From taiwan south korea japan and the Netherlands For its part the blue team also

Attempted to engage with other allies by Incorporating existing multilateral Groups such as a quadrilateral security Dialogue us japan australia and india This shows that a multilateral response To global semiconductor security is more Helpful than bilateral actions to quote The authors of the game’s debrief quote The scope cost and complexity of the Global semiconductor supply chain Requires cooperation at this scale So that was the game it showed that a Massive all-out conflict in taiwan was The least desirable outcome for all of The participants it also illustrated Just how much brinksmanship could take Place as all of the players attempt to Achieve their strategic goals The war game was also useful in the Sense that it allowed the authors of the Report on the game to come up with a Bunch of recommendations about how the Us can secure its supply of Semiconductors now i won’t go over it Here but i do encourage you to take a Read through the report when you have The time Implementing these measures could be one Of the only ways in which vital supplies Are secured and advanced tech is kept Out of the hands of the ccp All while avoiding world war three So what does this war game mean for the Current situation we all find ourselves

In Well it means that we can be cautiously Optimistic about the prospect of Avoiding a hot war in asia It’s an incredibly complex web of Interdependence on taiwan that lessens The appetite for an all-out conflict Something that this war game illustrated For me particularly is how significant Taiwan’s chip manufacturing industry is For its security I somehow doubt that western nations Would be as willing to come to its aid If there wasn’t a national security Aspect to the chip supply chain Now whether this was by design or by Happenstance it’s a favorable position To be in and taiwan should be very Careful about any moves that lessen Other countries dependence on its chip Supply and technology The war game has also shown how badly The u.s has under-invested in the sector Fun fact in 1990 the u.s supplied 80 Percent of the world’s semiconductors Today that’s less than 20 and falling by The day This isn’t something that’s isolated to Chips either it’s the mass outsourcing Of just-in-time manufacturing that has Left the us in an incredibly vulnerable Position The hope is that the chips bill will be Able to shift that imbalance but as the

Founder of tsmc said it’ll be easier Said than done The chinese for their part have been Ahead of the pack when it comes to the Focus on tech independence they viewed It as a national security issue and have Responded accordingly The rate at which they have been Expanding their semiconductor production Is scary by some estimates in 2030 they Could be the world’s largest producer of Semiconductors by volume However when it comes to the incredibly Sophisticated nanochips used in advanced Tech like smartphones supercomputers and Weaponry tsmc reigns supreme Whether china can produce its own nano Chips depends on whether it can get Access to the ip and knowhow from Tsmc and that is exactly what the Chinese are attempting to do Not only as a primary tactic in the game But in real life too While most of the headlines appear to be About chinese military bluster in the Taiwan strait it’s their actions Designed to seize control of chip making Ip that should be ringing the most alarm Bells if china is ever to control the Global chip supplies either through tsmc Or other means it’ll be a major blow to The u.s and its allies The chinese would be in a position of Strength that no aircraft carrier or

Nuclear submarine could counter Let’s just hope that the u.s and its Allies employ some of the Recommendations of the war game report Because i happen to think that some of The scenarios seen in the game are Already playing out And that’s it for my video today folks This was a super interesting one to Research however i would love to get Some feedback from you fine people So do you think we really could see a War break out was nancy’s trip Irresponsible or strategically important I’d love to know in the comments below Oh and while you’re down there you may Want to check out my socials page it’s Over there where i have the links to all The other places that you can follow me Off the tube telegram twitter tik tok And instagram You can also benefit from my weekly Email newsletter it’s over here where i Share my once weekly take on the markets As well as giving you the breakdown of My personal portfolio It comes with a 100 Spam free guarantee so all of that which You seek is below and finally if you Enjoyed this video smash that like Button don’t forget to hit that Subscribe button too oh and the bell as Well so youtube can give you a bell when Our next video goes live can’t wait to

See you all then [Music]


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