Economy, Asia - Pacific

China's direct sanction on Taiwan chips industry not logical, say experts

Neither US can allow Taiwan to unite with China, nor will China want to lose control of world's largest chips maker

Tuba Sahin   | 04.08.2022
China's direct sanction on Taiwan chips industry not logical, say experts

ANKARA

While the tension between China and Taiwan due to high profile US politician visit to the island is escalating, experts said sanctions are not expected to directly include the chips sector, which is a vital component of most industrial goods. 

China has suspended the import of some fruits and fish from Taiwan as of Wednesday and also banned the export of natural sand to the island following a trip by US House Speaker Nancy Pelosi to Taiwan, the first highest-profile visit by an American politician to the island in 25 years.

In a press during her visit, Pelosi said that "strength, goodwill and again, the demonstration of a democracy that has evolved to a stronger place now and offers a very strong contrast to what's happening in mainland China ... no more evidence needed than what happened in Hong Kong," referring to the semi-autonomous region which has undergone radical changes since pro-democracy protests erupted there in 2019.

China has opposed and condemned the visit, calling it "like playing with fire, are extremely dangerous" as it views Taiwan as a "breakaway province" and has vowed to reunify it with the mainland, including by force if necessary.

Speaking to Anadolu Agency, Sant Manukyan, head of the Investment International Markets Department with Türkiye's biggest private lender, Is Bank, said:

"The decisions [ban] are not new. In fact, China imposed restrictions in these areas before citing environmental impacts or illegitimacy,"

There is a possibility that China may expand sanctions against Taiwan, Manukyan said.

As Taiwan has great importance to the world economy as a major computer chips maker, Manukyan said: "It doesn't make much sense for China to take a direct step [sanction] on chips as it will create a global problem, it will draw the reaction of everyone. But of course, it is one of the problematic points."

Recalling the US's move to introduce a law for the investment of billions of dollars in domestic semi-conductor manufacturing and scientific research, Manukyan said semi-conductor investments in the US would bear their fruits in 3-5 years. Therefore chips issue is expected to escalate.

"When the importance of the chips for the world economy is taken into account, neither US can allow Taiwan to unite with China, nor will China want to lose control of the island. I foresee that this conflict between the two sides will continue," Manukyan stressed.

Bozkurt Aran, who heads the Trade Studies Center at the Turkish Economic Policy Research Institute (TEPAV), said the recent developments will mostly have political consequences rather than economics.

"China also manufactures semi-conductors not for specific purposes but for general use such as for car components. But Taiwan-made chips are more sophisticated. So China will only disturb the island by conducting expanded live-fire exercises and to keep it under its control," Aran noted.

Taiwan generates 70% of its total income from exports, 38.5% of which constitutes from electronic components, 34.8% from microchips and 13% from communication devices.

The Taiwan Semiconductor Manufacturing Company (TSMC) makes up more than half of the world's chips market.

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