Silicon Valley executives ignored years of classified warnings about Taiwan's chip monopoly, leaving the global economy exposed to a potential $10 trillion collapse if China moves against the island democracy that produces nearly all advanced semiconductors.
National security officials held secret briefings in Washington and Silicon Valley starting in 2021, warning Apple, Advanced Micro Devices, and Qualcomm leadership that China was preparing military plans for Taiwan.
A Chinese blockade could choke off the supply of computer chips made on the island and cripple the U.S. tech industry within months. The island roughly Maryland's size manufactures 90% of the world's high-end computer chips and enables roughly $10 trillion of global economic activity.
"The single biggest threat to the world economy."
Treasury Secretary Scott Bessent called Taiwan that last month at Davos, noting that "97% of the high-end chips are made in Taiwan." A confidential Semiconductor Industry Association report from 2022 projected cutting Taiwan's chip supply would trigger the largest economic crisis since the Great Depression.
U.S. economic output would plunge 11%, twice as much as the 2008 recession, while China would experience a 16% decline.
Bloomberg Economics estimates a conflict over Taiwan would cost around $10 trillion, equal to about 10% of global GDP, dwarfing impacts from Ukraine, COVID-19, and the Global Financial Crisis combined.
Despite these warnings spanning two presidential administrations, major tech companies refused to shift their supply chains away from Taiwan until recently. Executives prioritized quarterly profits and competitive advantages over geopolitical risks, with one McKinsey consultant noting they operated under "if we're screwed, everyone else is screwed" logic.
President Joe Biden offered billions in grants through the CHIPS Act to build domestic semiconductor plants domestically after his predecessor Donald Trump threatened tariffs on imported chips. Both approaches struggled against business realities: chips made in U.S. plants cost at least 25% more due to higher material, labor, and permitting costs.
TSMC committed over $50 billion to build three Arizona plants starting during Trump's first term, but customers balked at paying premium prices for technology a generation behind Taiwanese production lines where TSMC deploys its most advanced processes first.
The Trump administration escalated pressure through tariff threats this year, imposing a 32% rate on Taiwanese goods while exempting semiconductors pending separate negotiations. Commerce Secretary Howard Lutnick demanded companies purchase half their semiconductors from American factories or face 100% tariffs.
This arm-twisting produced recent commitments: Nvidia agreed to buy chips from TSMC's Arizona facilities despite costs running "more than 5% but less than 20%" higher than Taiwanese-made equivalents according to AMD CEO Lisa Su. TSMC pledged an additional $100 billion investment for four more Arizona plants by 2028.
Taiwanese semiconductor and tech companies committed $150 billion more in U.S. investments as part of a trade deal announced last month that also includes $250 billion in credit guarantees for smaller firms moving operations stateside.
Even with these pledges, America faces a long timeline before achieving meaningful independence from Taiwanese chip production. The United States spends $200 billion on semiconductor plants through 2030 but will still account for only 10% of global production, the same share it held in 2020 when warnings began intensifying.
Military planners believe Chinese President Xi Jinping wants his army ready to take Taiwan by 2027 according to Admiral Philip Davidson's March 2021 Senate testimony, though many defense analysts remain skeptical such a move could occur that quickly.
