It's a huge issue. I think there's a decent chance China / Taiwan will devolve into a shooting war, and TSMC will either have its factories bombed at some point, or it will be nationalized by a victorious China and American investors will be told "This is ours now. If you own shares, write 'em off. You lost the war, so tough cookies."
I used to own TSMC stock. I sold it. Concern about this exact scenario is pretty much the sole reason I exited my position.
While its hard to argue that the chance of a shooting war is NOT decent, it's likely that China will not make real moves for the foreseeable future (maybe 5 to 10 years at least):
In order for China to make a move, they must be able to have confidence beyond doubt that their operation would succeed. As a failed annexation would cause political and economical havoc. In order for China to have high confidence in their ability to over take Taiwan, they need capability that is simply not available to them right now (Or any organization on earth for that matter) because to fight Taiwan means to wage asymmetric warfare against a technologically advanced, prepared, reasonably well funded, and determined nation.
Some considerations that China will have to face:
* Dispersed AA missile launchers (MANPADs) that will deny complete aerial superiority over Taiwan airspace. MANPADs are cheap, work without any centralized command system, can be operated by single user without much training, and can be concealed.
* Satellite and other intelligence technology that can detect boarding ships and potentially guide missiles to eliminate them. This is bad for China as boats are still arguably the highest throughput method of getting a lot of people somewhere, quickly. Aircraft will face problem with AA.
* Cruise missile counterattacks. Taiwan doesn't have that many cruise missiles, and they each don't carry a massive yield in terms of payload. However in the event of real hostility, Taiwan can deploy them against many airfields and supporting infrastructure of the China military. This will definitely at least hinder operation of many facilities.
That's just my understanding so far. And of course, things will change, so we'll see how it goes in the future.
> it's likely that China will not make real moves for the foreseeable future
All it would take is an incident causing the dictatorship's leader to lose face and force him to take action to distract from the crisis (see Falklands War for example.) It could be anything, something like an industrial accident at a poorly managed facility causing massive deaths and a worldwide crisis. Initially they would cover it up but when it becomes public, like in Chernobyl, the régime would be discredited and forced into a panic.
I know it is far fetched, it's hard to see how such a mishap could have such far reaching consequences, but it realistically could happen at any time.
While not official, the US has stake in the game. They have actively prevented ASML euv machines from being distributed into China. A move against Taiwan is a big move against US interests so China and the US are at a stalemate.
Should China attack Taiwan it will be at a time when the semiconductor industry is the least of our concerns and the US is in a significantly lower position than China.
Right now it's just cold war era threats with both sides being paranoid of the other and both sides also being too afraid to act.
Most of this is wrong even for a few years ago when fanciful western projections of PRC campaign ovre TW was extra wrong.
PRC planners have concluded it can take TW without US intervention ~5 years ago. US/JP planners have finally admitted the same this year. Reality is TW has an extremely outdated military that's not at all well prepared or well funded. It doesn't have any extensive asymmetric training, nor is the nation determined to fight insurgent style if shit hits fan. Those are all US porcupine wish lists, and none of it was / is remotely reality.
The consensus understanding right now is sheer imbalance in capabilities (PRC has both quantity and quality) means PRC will be able to do to TW what US did to Iraq. More or less annihilate their military from the conventional fight within a few days after which PRC operations would be relatively uncontested.
>>>Dispersed AA missile launchers (MANPADs) that will deny complete aerial superiority over Taiwan airspace
MANPADs have altitude limitations. Fixed wing manned aircraft can fly high, and use precision munitions to prosecute targets. China also has a large fleet of combat drones that can fly the riskiest mission profiles, even drawing out Taiwanese air defenses by provoking fire, revealing themselves for counterattack.
>>>Satellite and other intelligence technology that can detect boarding ships and potentially guide missiles to eliminate them.
That would borderline on a pre-emptive attack which could be easily spun by the CCP in the court of international opinion. Also, the PRC's integrated air defense systems along the coast are damn heavy, not to mention their surface fleet's own air-defense ships. Good luck hitting ships in harbor with cruise missiles.
The main advantage Taiwan has is that the PLAN has insufficient amphibious shipping capacity to put enough combat power ashore in a reasonable timeframe. But they already have 2 brand-new LHAs out a total 8 planned: https://en.wikipedia.org/wiki/Type_075_landing_helicopter_do...
Combine with the PLAN's existing 8 LPDs ( https://en.wikipedia.org/wiki/Type_071_amphibious_transport_... ), and STUFT (Ships Taken Up From Trade, aka "civilian RO/RO ships pressed into moving military hardware"), and they should be able to credibly move several divisions by 2025. With the growth in their surface combatant fleet and the modernization of their air force, they should be able to keep the US/Japan/Australia busy long enough to not interdict their amphibious assault.
Chinese leaders will still be leaders in a China without chips and if the rest of the world has no chips its not their worry. They will be less playful times with less gadgets and slower processes but no dictatorship ever worried about building walls around their borders. Actually they help the dictatorship to control the people inside.
That's not necessarily good on the long term. China was on par with Western powers until about 1500-1600 and had everything they needed. Then they grounded their fleets and turned inside. In a couple of centuries the British and everyone else came knocking at their harbors with gunships. China recovered only recently.
