That doomsday scenario injects a new dynamic to Washington’s war-gaming that highlights an uncomfortable dilemma: For all the talk of strong support for the government in Taipei, the US has concluded that it’s too dependent on Taiwan for the kind of advanced chips that are essential for the latest smartphones and next-generation military hardware, and is working to build more domestic capacity as a result.

“The focus among policymakers — and this is true of the US and elsewhere — is of understanding where risks are or concentration is,” said Chris Miller, an associate professor at Tufts University and the author of Chip War: The Fight for the World’s Most Critical Technology. The chip industry’s concentration in Taiwan, he said, “has raised red flags.”

The following account of the contingency planning being undertaken was provided by multiple officials and former officials who requested anonymity to speak candidly. They stressed that plans are purely hypothetical and many details remain unresolved. 

Eoin Treacy's view

There is a lot of talk about the possibility of war over control of Taiwan. The island economy’s dominance of the semiconductor sector is often associated with TSMC. However, Taiwan’s network of smaller essential component companies is equally important. That’s not going to be solved by expatriating a relatively small number of engineers.

A scenario that does not get nearly enough attention is the possibility Taiwan is struck by a massive earthquake and China moves to provide massive humanitarian aid. Then they just don’t leave. To me that is a more likely scenario than an outright invasion.

At present Taiwan can choose to refuse to sell to China because there is a shortage of supply and lots of customers. When the new supply comes online from massive global capital investment that’s not going to be such an easy choice to make. That’s particularly relevant as we look down the barrel of a global recession.