Imagine this: China announces a naval blockade of Taiwan. Within hours, TSMC's fabs — producing over 60% of the world's semiconductors and roughly 90% of the most advanced chips — go dark to the outside world.

No new iPhones. No new cars. No AI training runs. No medical devices. Military systems can't be replenished. The global economy loses trillions within weeks.

This isn't science fiction. TSMC itself has studied this scenario and concluded it cannot move — 80-90% of its production is physically rooted in Taiwan, supported by hundreds of specialized suppliers, tens of thousands of engineers, and decades of institutional knowledge that can't be relocated. ASML, the Dutch company that makes the only machines capable of producing cutting-edge chips, has built in a kill switch to remotely disable its lithography equipment if China seizes it.

You Can't Just Move the Fabs

A single leading-edge fab costs $15–50 billion and takes 3–4 years to build. Each EUV lithography machine is the size of a bus, requires nanometer-precision calibration, and takes months to install. TSMC has dozens of fabs in Taiwan. Replicating even a fraction is a generational project.

But the real moat isn't the buildings or even the machines — it's the ecosystem. Hundreds of specialized suppliers, packaging firms, test houses, and a trained workforce built over 40 years. The "secret sauce" is process recipes and yield optimization know-how held by people, not equipment. Current diversification efforts in Arizona, Japan, and Germany are incremental hedges, not replacements — and US-made chips already cost roughly 50% more than Taiwanese ones.

The Silicon Shield

Taiwan's chip dominance functions as a deterrent — a strategic poison pill. Invading or blockading Taiwan would devastate China's own economy and tech sector. This positioning is deliberate: Taiwan has cultivated its indispensability.

But the shield has a critical flaw. It deters invasion but not necessarily blockade. China could cut off Taiwan's energy, food, and material imports without destroying the fabs themselves. And the poison pill may be too poisonous for anyone to actually swallow — it's mutual assured economic destruction.

It Was Never About the Chips

Here's what most people miss: China's claim on Taiwan dates to 1949 — decades before TSMC existed. Reunification is written into China's constitution. It's core to CCP legitimacy and central to Xi Jinping's legacy.

The strategic value goes beyond semiconductors: controlling the Taiwan Strait breaks the "first island chain" constraining Chinese naval power projection. The "century of humiliation" narrative makes backing down politically existential for any Chinese leader. The timeline of aggression — missiles, the Anti-Secession Law of 2005, escalating military provocations — all predate Taiwan's semiconductor dominance.

The chips are a restraint on Chinese action, not a motivation for it. Which means as the restraint weakens, the danger grows.

The Closing Window

As the US, Japan, and Europe build domestic fab capacity, Taiwan's silicon shield weakens year by year. China is investing massively in domestic semiconductor capability — trailing nodes now, but closing the gap. The dangerous trajectory: political motivation stays constant while economic deterrence decreases.

TSMC's chairman insists the most advanced production stays in Taiwan. The US is pressuring Taiwan to move up to 40% of capacity to America. Taiwan has flatly refused, understanding this would erode its strategic leverage.

The window of maximum danger: the period where China feels capable enough domestically but before full global diversification is complete — likely the late 2020s to mid-2030s.

What Can the World Do?

The United States should continue CHIPS Act investment while recognizing Arizona fabs are a supplement, not a replacement. Maintain strategic ambiguity on Taiwan defense while building credible deterrence. Invest in workforce development — the bottleneck is trained semiconductor engineers, not money. And stop threatening tariffs against the very ally you're trying to protect.

Japan and allies should deepen the US-Japan-Taiwan semiconductor triangle and continue Rapidus investments as insurance capacity. Maintain control of critical upstream inputs — chemicals, materials, equipment — as additional leverage.

Europe should accelerate EU Chips Act implementation and focus on existing strengths: ASML's lithography monopoly, automotive chips, and power semiconductors — rather than trying to replicate leading-edge logic fabs.

Taiwan must maintain technological leadership as long as possible — the shield only works if Taiwan stays indispensable — while diversifying economic relationships to reduce vulnerability to blockade.

The collective West needs to coordinate export controls on semiconductor equipment, develop joint contingency plans for a blockade scenario including strategic chip reserves, and recognize that the window of maximum danger is approaching.

The Clock Is Ticking

The semiconductor concentration in Taiwan is the single greatest economic vulnerability in the modern world. There is no quick fix — you cannot move, replicate, or replace 40 years of ecosystem development in a decade.

The real question isn't whether China wants Taiwan. It does, chips or no chips. The question is whether the economic deterrent will hold long enough for the world to build resilience.

Every year of investment in diversification buys time. Every year of delay increases risk. This is not a technology problem. It's a civilization-level strategic challenge that requires coordinated action now.

This analysis draws on two Quarex Living Books that explore these issues in depth through AI-powered, question-driven exploration: The Chip War and Cross-Strait Crisis. Ask your own questions. Follow the threads. Go deeper.