China announced sanctions on seven Taiwanese lawmakers earlier this week but the sanctions were aimed at notable officials from Taiwan’s ruling party, the Democratic Progressive Party (DPP).
There were also sanctions on certain imports and exports. China banned import of certain fruits, fishes and other food items and placed curbs on export of Chinese sand. These sanctions, however, do not affect Taiwan’s GDP or the traders who run businesses related to these items, therefore making those sanctions ‘symbolic’.
Beijing may now target wood or minerals and also bring more food products under the ambit of sanctions but there is one sector China does not want to touch – Taiwan’s semiconductor industry.
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Chinese semiconductor ambitions have taken a hit as evidenced by the recent crackdown on its chip sector bigwigs. Charges of corruption, mismanagement of funds and inability to meet the targets Chinese president Xi Jinping had set for the industry means that China is now back to the drawing board.
Until new plans are devised, China will depend on its neighbour – which it claims is a part of the motherland and if needed will be reunified using force – for cutting-edge technology.
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This is the reason why Xi did not make any attempts to change the status quo. The eternal leader cannot look wounded ahead of the Communist Party of China’s twice-a-decade party congress where he expects a smooth transition into the third term of his presidency – a first for any Chinese head of state.
Technology remains at the centre of the trade relationship between Taipei and Beijing, comprising 70% of Taiwan’s total exports to China. China imported $79.4 billion worth of integrated circuits from Taiwan in 2022 and the number makes up 38% of China’s total imports, according to a Bloomberg report.
The Taiwan Semiconductor Manufacturing Co (TSMC) accounts for around half of the global chip market and China does not have the luxury to look around for another supplier at a time when global leaders look at Beijing as a power which encroaches on the sovereignty of independent nations.
TSMC has also developed the most advanced 5-nanometer and 7-nanometer chips which China is heavily reliant on. As China’s ambitions to become a semiconductor superpower suffered due to graft, the crackdown also revealed that the chips that China manufactures are several years behind TSMC’s standards.
There is always a fear of a full-scale war which would change all equations but China’s recent military drills where it imposed a not-so-subtle naval and air blockade could harm its own trade interests instead of impacting Taiwan.
The Taiwan Strait is one of the world’s busiest shipping lanes in the world and 88% of the world’s largest ships by tonnage passed through the strait this year. So a naval blockade will end up hurting China as it would directly impact Chinese ports as access to ports in Hong Kong and northern China are dependent on the Taiwan Strait.
Taiwan also plays an important role in China’s local economy via the semiconductor industry. Taiwanese companies like Hon Hai Precision Industry Co., which is the main iPhone assembler for Apple Inc and famously known as Foxconn, was once the largest private employer in China.
It still employs more than 200,000 workers in its Zhengzhou manufacturing unit. Foxconn, TSMC and other major electronic firms have large factories inside China and China cannot order a sanction on Foxconn and other Taiwanese companies without hurting the local economy.
(with inputs from Bloomberg)
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