Executives of publicly traded US companies are increasingly concerned about the specter of a further escalation of tensions over Taiwan, a major supplier of critical components such as semiconductors.
The number of annual registration applications citing Taiwan as a risk factor has risen significantly over the past 12 months, according to Financial Times calculations based on Sentieo data. In March, a popular time to release so-called “10-k” reports, 116 companies identified Taiwan as a risk to their business, and the 12-month moving average hit its highest level in at least 16 years this month.
Technology companies represent the sector most involved, with those in the semiconductor industry sounding the loudest alarm. This is because Taiwan, the largest producer of the most advanced chips, is quickly becoming one of the world’s most dangerous geopolitical hotbeds. The fear is that in the event of a conflict with China, American companies will not be able to get the microchips needed to make smartphones, electric cars, new weapons, computers, industrial machines and even medical devices. Healthcare is the second most involved sector.
“A ‘de facto’ blockade by mainland China’s regular military exercises would create bottlenecks in high-growth sectors that rely on semiconductors, such as high-performance computing, internet of things, data centers and electric vehicles,” said Alicia García-Herrero, chief Asia-Pacific economist at French bank Natixis, said.
In sign of the potentially far-reaching consequences for business, a group of chief executives of major US banks this week told Congress they would comply with any demand by the US government to withdraw from China if Beijing attacks Taiwan. The comments came just days after US President Joe Biden said the US would defend Taiwan from a Chinese attack.
The median US company had just five days’ worth of chip inventories in 2021, up from 40 in 2019, according to an investigation the Ministry of Commerce.
In early August, Biden signed the Chips Act, which will provide $280 billion in funding to support and kick-start domestic semiconductor manufacturing and research.
“The US will put more pressure on key suppliers to ban exports to China and develop production in their own market with industrial policy tools, such as the Chips Act and a push for friend-shoring,” García-Herrero said.