Taiwan open to cutting off countries from dominant semiconductor sector

Taiwan stopped selling computer chips to South Africa this week, the first time it has cut off semiconductor supplies to punish a country over political disagreements.

On Tuesday, Taiwan’s government said it would not ship certain semiconductors to South Africa anymore. Officials blamed South Africa for doing things that “undermined our national and public security.” The dispute is about where Taiwan can keep its diplomatic office in South Africa.

A Taiwan official who didn’t want to be named said the government plans to use business deals and trade rules to get what it wants from other countries. Taiwan might do the same thing to other nations that don’t treat it well, the person said.

“By utilizing Taiwan’s position in the global chip supply chain, this looks like Taipei’s attempt at building an autonomous deterrent on the world stage,” said Wen-ti Sung from the Atlantic Council’s Global China Hub. Other countries will now think about what Taiwan might do to help or hurt them, he said.

Taiwan tests its world power using the chip trade

For years, Taiwan thought its role in making computer chips would keep China from attacking it. Now, Taiwan wants to see if chips can help it win friends and punish enemies around the world.

Many countries worry about getting too many chips from Taiwan. In 2022, Commerce Secretary Gina Raimondo said America depending on Taiwan for chips was like Europe depending on Russia for oil. “We cannot afford to be in this vulnerable position,” she told CBS.

The US has started making its own chips and getting Taiwan Semiconductor Manufacturing Co. to build factories in America. Other countries would need years and lots of money to copy what Taiwan’s chip companies can do.

The US and China have been fighting over who can buy and sell chip equipment. Washington wants countries like the Netherlands, South Korea and Japan to stop selling certain things to China, even if their own companies lose money. This makes countries want to make more of their own chips instead of buying them from others.

China has more to lose by getting cut off

China buys lots of chips from Taiwan, so it has the most to lose if Taiwan cuts it off. Taiwan’s President Lai Ching-te has been tougher on China lately. Earlier this year, Taiwan stopped Chinese companies Huawei Technologies Co. and Semiconductor Manufacturing International Corp. from getting technology to build chip factories.

On Wednesday, Chinese Foreign Ministry spokesman Guo Jiakun said Taiwan “deliberately destabilized global” supply chains by blocking South Africa. China is ready to work with other countries on chips, he said.

The problem started because Taiwan has an office in South Africa that acts like an embassy, even though South Africa stopped recognizing Taiwan as a country in 1997. Taiwan says South Africa began telling it to move the office from the capital city to Johannesburg in 2023. This happened after South Africa held a meeting of BRICS countries that China’s leader Xi Jinping went to.

South Africa has pushed harder for the move as it gets ready to host a Group of 20 meeting in November. Xi plans to come to that meeting too. A Taiwan official said the chip ban is meant to make South Africa sit down and talk about the office.

The ban probably won’t hurt South Africa too much right away. Taiwan only sent about $4 million worth of the blocked items to South Africa last year, government numbers show. South Africa makes cars for other countries, which helps its economy grow. Those car companies might have trouble getting chips, but they usually buy them through big car makers instead of directly from Taiwan.

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