The former Trump Vice President, Vance, recently sounded the alarm: Taiwan is not just a territory—it’s the world’s chip backbone, and if China reclaims it, the U.S. could face serious economic disruption.
Missiles and Chips: Two Sides of the Same Net
On the surface, it looks like military protection: Patriot missiles deployed, defense budgets rising, Taiwan tied to U.S. strategy.
But underneath lies the economic layer: TSMC dominates advanced chips—smartphones, AI, automotive, defense systems.
Together, they form a net—but a fragile one. Military and economic levers are interdependent but unsustainable.
The Chip Crisis
U.S. domestic chip production shrunk from 37% → 12% of global output
Taiwan alone accounts for 22% of global chip capacity, including cutting-edge 5nm & 3nm chips
Even U.S. firms with 47% global chip sales manufacture 88% overseas, mostly in Taiwan
Attempts at Control
The U.S. tried to secure chips via the CHIPS Act and relocating TSMC fabs, but hurdles remain:
Skilled labor shortage
Fabs take 3+ years to build
Costs are 30–50% higher than Taiwan
Meanwhile, Taiwan depends on TSMC for 20% of GDP, 40% of exports, and 10% of power usage. This strategy effectively charges the U.S. both economic “protection fees” and military protection payments.
Strategic Weaknesses
Even if TSMC builds in the U.S., the core tech & supply chain remain in Taiwan/Asia. China is rapidly growing its chip output (24% global share soon), making the U.S. dependence a structural vulnerability, not a strength.
Key Insight
Vance’s warning shows a fundamental fragility:
Military and economic levers are entangled but unsustainable
Dependence on foreign tech undermines U.S. claims of strategic dominance
Taiwan and TSMC cannot be treated as permanent hostages without risking industrial collapse
Bottom line: Missiles + chips may look like a strong net—but reality is fragile. The U.S. is over-leveraging Taiwan to cover its own industrial weaknesses, a miscalculation with long-term geopolitical and economic consequences.
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