Written by: Emilie Sterna

24 June 2025  

Taiwan, a global leader in semiconductor manufacturing, is an indispensable actor in  cutting-edge technology industries. However, on the world stage, Taiwan occupies a unique and  complex position. Officially known as the Republic of China (ROC), Taiwan is an island  democracy that has developed independently for decades, yet the People’s Republic of China (PRC)  claims it as part of its territory under the One China Principle. This ongoing dispute has led to  persistent military, diplomatic, and economic tensions, with China regularly asserting its claim  through military actions and political pressure. This has resulted in official diplomatic isolation for  Taiwan, as it is not recognised as a country by most of the world. As a result, Taiwan cannot  represent itself in most international organisations. Nevertheless, at the same time, Taiwan has  become the undisputed global leader in semiconductor manufacturing, producing a significant share  of the world’s chips, mainly through companies like TSMC. In 2024, Taiwan produced 60% of the  world’s semiconductors, and 90% of the most advanced ones. This dominance has turned Taiwan’s  technology into a strategic asset, often referred to as the “Silicon Shield”. This article aims to  analyse how Taiwan’s critical role in global supply chains acts as a deterrent against external  aggression, since any disruption would have catastrophic economic and technological consequences  for China and the world. Moreover, this article explores the geopolitical rivalries and pressures  surrounding the Taiwanese semiconductor industry.

The “silicon shield”: a strategic asset for Taiwan’s survival and defence 

Taiwan’s dominance in the technology market provides it with a unique “survival” tool. The  island’s technological superiority enables it to use this advantage as a deterrent against a potential  Chinese invasion. This concept, called the “Silicon Shield” by journalist Craig Addison, refers to  the fact that the raw material for electronic chips is silicon. The semiconductor industry is  absolutely vital to the modern world, as electronic chips are fundamental components in most of our  devices, including phones, computers, and cars. The world’s most advanced and efficient  semiconductor industry is currently based on the island of Formosa, making this sector crucial for  Taiwan’s protection. Any aggression against Taiwan would not only endanger the island but also  threaten the stability of the global economy. To fully understand how the “Silicon Shield” operates, it is important to look at key data from Taiwan’s semiconductor sector. In 2023, Taiwan exported  93.4% of its semiconductors, highlighting the extent to which other countries rely on the island, as  almost the entire industry serves international markets. Of these exports, 53.8% were sent to  mainland China, underlining China’s significant dependence on Taiwanese semiconductors.  However, this reliance is mutual: Taiwan also depends on major economic partners like China.  Thus, any Chinese invasion of Taiwan would disrupt China’s own critical imports, illustrating the  complex interdependence between Taiwan and China, which is why the chip industry serves as a  “Silicon Shield.”

An attack on the Taiwanese island could also have a huge impact on other countries due to  the semiconductor issue. The “Silicon Shield” would once again work to protect Taiwan, as  countries affected by a PRC-ROC war might be encouraged to intervene militarily to protect their  economic interests. For instance, this could be the case for the United States. Given that  semiconductors are a national security issue for the United States, and that it is heavily dependent  on Taiwanese chips, it might want to intervene in the conflict to protect its interests. This could  potentially dissuade China from getting involved in a conflict with Taiwan, knowing that the United  States would intervene. The same could apply to Western countries dependent on Taiwanese chips.  According to a Foundation for the People survey conducted in 2025, 62.5% of Taiwanese believe  that the semiconductor industry serves as a “Silicon Shield” and that Western countries would be  encouraged to intervene militarily to protect the global economy and their interests. This  demonstrates that the Taiwanese trust and believe that the Silicon Shield protects them from a  potential invasion. However, this “Silicon Shield” is also a fragile balance.

On the one hand, it pushes the Taiwanese technology industry to constantly improve and  excel in order to maintain its position, at the risk of losing its shield. On the other hand, Taiwan  faces climatic risks such as earthquakes and typhoons. These events could potentially cause energy  shortages on the island or destroy the infrastructure that produces semiconductors, resulting in the  island’s inability to produce as many semiconductors as demand requires, and leading to it losing its  position in the market. Taiwan would then lose its protection and become more vulnerable to attack.  In addition to the industry’s influence on foreign powers, it also plays a role in Taiwan’s defense  situation. Indeed, its cutting-edge technological skills can be invested in the defense sector to design  advanced weapons to protect itself from Chinese aggression. This idea of a “Silicon Shield” also  has an impact on Taiwan’s international perception. The “Silicon Shield” highlights the

indispensable role of the island, as it holds a monopoly in this sector. This enables Taiwan to  2

maintain its presence on the world stage and achieve economic autonomy through this crucial  sector, and it also helps Taiwan defend its unique identity. However, Taiwan’s leading position in  the semiconductor market exacerbates the rivalries of major powers on a global scale, resulting in  the fragile balance of this “Silicon Shield.”

Geopolitical rivalries and pressures surrounding the Taiwanese semiconductor industry 

While the concept of a “Silicon Shield” appears to offer Taiwan protection from potential  aggression, it also attracts the interests and ambitions of other major powers, particularly China and  the United States. For China, gaining control over Taiwan would mean inheriting a dominant  position in the global semiconductor market, making the island an even more strategic target.  Meanwhile, the United States may pressure Taiwan to diversify its semiconductor production sites  to reduce global supply chain risks. Furthermore, with Donald Trump’s election in November 2024,  Sino-American tensions have escalated, putting additional pressure on Taiwan.

China is highly dependent on Taiwan for semiconductors. To reduce this reliance, the PRC  has cut its imports from Taiwan from 61.2% in 2020 to 53.8% in 2023, a decrease of 12.1% over  three years. This shift aligns with the “Made in China 2025” strategy, which aims to boost domestic  semiconductor production. The initiative set ambitious goals: 40% self-sufficiency by 2020 and  70% by 2025. However, the 40% goal was only reached in 2022. In 2023, it succeeded in producing  and integrating its own 7-nanometre chip into a smartphone, an achievement previously limited to  Taiwanese (TSMC), Korean (Samsung), or American (Intel) expertise. Furthermore, the PRC has  intensified and normalised its military presence around Taiwan through frequent exercises, thereby  increasing pressure and tension on the island. By normalising such activities, China could  potentially use a military exercise as a “Trojan horse” to disguise a real invasion. If this scenario  were to occur, and assuming Western countries would intervene to protect their economic interests,  Taiwan could still find itself vulnerable to a surprise attack, since a coordinated response would take  time. To counter this risk, Taiwan has developed a “porcupine” defence strategy. The purpose is to  make any invasion by China as difficult and costly as possible. Taiwan plans to protect its critical  infrastructure and deploy low-cost, effective weapons such as drones, anti-aircraft and anti-ship  missiles, to hold off aggression while awaiting potential Western support. This approach ensures  that Taiwan does not rely solely on its “Silicon Shield” for protection, but also has robust defensive  measures in place.

Regarding the United States, following his re-election, President Donald Trump renewed his  “America First” policy, aiming to revitalise the American economy by promoting products made  and designed solely in the United States, highlighting a clear shift towards protectionism. To  achieve this, Trump has used tariffs to strengthen American industries and address economic  imbalances with other countries. He has not hesitated to threaten both adversaries and allies with  tariffs, creating instability in the global economic climate. Taiwan and its semiconductor industry  have not been exempt from this initiative. In February 2025, Trump accused Taiwan of “stealing”  the U.S. semiconductor industry and threatened tariffs of up to 100%. He also declared that Taiwan  would have to pay if it wanted continued U.S. military protection. As a result, TSMC, the world’s  leading semiconductor company, faced significant pressure to relocate some of its production  outside Taiwan to the United States. Additionally, to ease tensions, TSMC pledged a $100 billion  investment in the U.S. to build five new factories, helping to avoid the risk of U.S. military  disengagement from Taiwan. The U.S., seeking to protect its own interests, has pushed Taiwanese  semiconductor companies to diversify their manufacturing facilities to prevent potential shortages  in times of crisis. However, Trump’s protectionist policies have raised concerns in Taiwan. If the  U.S. succeeds in regaining a dominant position in the semiconductor sector, some Taiwanese  question whether the U.S. would still have a reason to defend Taiwan against a Chinese attack.  Many in Taiwan, including Chance Hsu, the KMT’s deputy director of international affairs, worry  that TSMC’s investment in the U.S. could erode Taiwan’s technological edge and put the country’s  national security at risk. Meanwhile, as Beijing’s threats intensify, Taiwan has raised its defence  budget to 3% of GDP and increasingly relies on American weaponry for its security. This  dependence gives the U.S. considerable leverage in negotiations with Taiwan.

In conclusion, Taiwan’s leading role in semiconductor manufacturing makes it a key actor in  global technology and international politics. The “Silicon Shield” offers Taiwan some protection,  but also attracts pressure from both China and the United States. However, this shield is a fragile  balance; any disruption in the industry or shifts in global alliances could quickly weaken Taiwan’s  position. As China works to reduce its reliance on Taiwanese chips and the US pushes for more  production domestically, Taiwan faces difficult choices. The island must continue to innovate and  carefully manage its relationships with these major powers. Ultimately, Taiwan’s security and  global position can depend on its ability to adapt and maintain its technological edge in a  challenging environment.

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