US would destroy Taiwan's semiconductor factories rather than letting them fall into China's hands, a former national security advisor says – Yahoo Finance

• A former national security advisor said the US would “never” let China gain hold of Taiwan’s semiconductor factories.

• Robert O’Brien told Semafor that China could “control the world economy” with the factories.

• TSMC is the world’s largest chipmaker, powering most of the devices and equipment used every day.

A former national security advisor said the US would destroy Taiwan’s semiconductor factories if China seemed on the verge of controlling them after an invasion.

Robert O’Brien, who served as national security advisor in the Trump administration, told Semafor the US “and its allies are never going to let those factories fall into Chinese hands.”

Taiwan Semiconductor Manufacturing Company is the world’s largest chipmaker, making up an estimated 90% of the market for advanced processors. The company produces chips for most devices and equipment like phones and cars that are used every day. More advanced chips produced by the manufacturer are used in highly advanced technology like machine learning and guided missiles.

If China were to take control of these factories, the country would be “like the new OPEC of silicon chips,” O’Brien said, adding that China would be able to “control the world economy.”

The former advisor compared the US destroying the factories to when British Prime Minister Winston Churchill ordered the destruction of France’s naval fleet during World War II after France surrendered to Germany, per Semafor.

Neither O’Brien nor TSMC immediately responded to requests for comment from Insider.

Apple is TSMC’s biggest customer, and the manufacturer produces most of the 1.4 billion smartphone processors in the world. Around 60% of the simpler microcontrollers that automakers also reportedly use are made by the company.

Though a lot of the research and development for semiconductors happens in the US, the past 30 years saw manufacturers deciding it was best to outsource manufacturing, William Alan Reinsch, a senior advisor at the Center for Strategic and International Studies, previously told Insider.

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“You build a big factory and you crank these things out by the thousands, and you do it in a low-wage, nonunion country that probably doesn’t have environmental requirements,” Reinsch said. “You keep all the design and IP at home and you do all your sales, marketing, and service at home, and that’s where you make the money.”

O’Brien is not the first to raise the idea of destroying Taiwan’s semiconductor factories if China successfully invades. Two US scholars recommended the move in a paper published by the US Army War College in 2021.

“To start, the United States and Taiwan should lay plans for a targeted scorched-earth strategy that would render Taiwan not just unattractive if ever seized by force, but positively costly to maintain,” the paper said. “This could be done most effectively by threatening to destroy facilities belonging to the Taiwan Semiconductor Manufacturing Company, the most important chipmaker in the world and China’s most important supplier. Samsung based in South Korea (a US ally) is the only alternative for cutting-edge designs.”

But Chen Ming-tong, the director-general of Taiwan’s National Security Bureau, has said it would be unnecessary for the US to destroy Taiwan’s semiconductor factories in the case of an invasion, because the system is already deeply integrated into the global supply chain, meaning that production can be shut down by the US and other countries without physically destroying the factories.

For example, TSMC wouldn’t be able to produce certain chips without components from the Dutch supplier ASML, Chen said. “Even if China got a hold of the golden hen, it won’t be able to lay golden eggs,” Chen said.

As tensions between mainland China and Taiwan continue to escalate, analysts are predicting a Chinese invasion of the island within the next few years. If China does invade Taiwan, “that would be the biggest impact we’ve seen to the global economy — possibly ever,” Glenn O’Donnell, the vice president and research director at Forrester, previously told Insider, adding that it could be worse than the stock market crash in 1929.

Correction: March 14, 2021 — An earlier version of the story misstated how much of a certain chip used by automakers is made by TSMC. The company makes about 60% of these “microcontrollers.”

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