ASML and TSMC plan to prevent China from seizing chip pearl by invading Taiwan

Although tensions seem subdued for the time being, doubts about a possible Chinese invasion of Taiwan have become an ongoing issue of great concern around the world. In addition to the geopolitical escalation that an attack on Taipei could entail, the struggle for the island became the main problem for the global economy due to the dominance of the semiconductor industry. Mainly through its flagship company TSMC, the small Asian country controls this key industry for the energy transition, artificial intelligence and all types of key electronic products for today’s world.

Taiwan’s importance is even greater because its chip dominance is largely focused on the most sophisticated. That’s why ASML (the largest partner of the Asian firm) and TSMC have prepared a plan in case the worst-case scenario happens and the Chinese military forcesare beginning to take hold of the sensitive Taiwanese industry or when a seizure occurs. According to Bloomberg, both companies have prepared a protocol for deactivating the machines remotely, and the Netherlands has even simulated a possible intrusion.

The formula to render the island’s hardware unusable, a key to the race for global chip dominance, has been implemented particularly in the Dutch firm’s key product, which it has sold to the Taipei firm for years. Equipment for extreme lithography (EUV) is an industry-leading system that, for many experts, represents the future of the sector. This is a technology that only a European firm possesses and which allows the use of ultraviolet light to create complex patterns on the most complex microchips.

This system is fundamental to state-of-the-art semiconductors, for military use and artificial intelligence, two critical areas. As such, ASML has already spoken to senior US officials regarding concerns that Beijing is mastering this technology through weapons. Also, if its use spreads to Chinese companies that are already heavily involved in the sector, it will also be a disaster for ASML. This model was one of the keys that allowed the Dutch company to become Europe’s big tech gem, reaching a capitalization of 343,000 million euros and a sharp 70% rise from 2023.

ASML machines are a major focus in the US-China trade war. After imposing its own restrictions, Washington pressured the Netherlands will impose restrictions on his opponent. Consequently, the Dutch government revoked the export permits for some of the firm’s equipment so that it could not reach the Asian country. In response, US officials asked ASML and TSMC for information on how a Chinese invasion of the island might affect them.

In any case, EUVs are extremely delicate machines that require careful maintenance. In fact, a constant supply of ASML spare parts is required. This, in addition to the lack of specific knowledge of these models and the “blackout” from Amsterdam, will lead to The invasion prevents China from capturing the technology. In fact, in a recent interview with CNN, TSMC president Mark Liu explained that if soldiers enter their factories, they will find “broken” machines, so “no one will be able to control TSMC during the invasion.” all the machines and factories would stop working.’

“EUV”, ASML’s key machine

As for Chinese companies that are already actively involved in this sector, it is worth noting Huawei’s great success. This company, together with SMIC, will start creating its own next-generation chips to achieve independence in this sector. Until now, the Asian firm used models, namely, from ASML. The plan has received significant support from the government, which continues to take steps to “remove Western technology” and replace it with its own. In this sense, they not only introduced plans “phasing out” of Intel and AMD chips Chinese computers, but they hope to soon take similar steps in other areas, such as ditching the Windows operating system and other software in their state-owned companies.

Although there is no open diplomatic or economic confrontation, there are movements between the main actors From the market. ASML, at the request of the US, began to stop exporting chip machines this year to China. According to Bloomberg, even before this ban, the US asked ASML to cancel orders that were already planned for the Asian giant. A series of measures that slowed the company’s sales to China by 15%.

However, late last month, when the lithography company’s leadership changed, then-CEO Peter Wennink said that the impact on ASML accounts until 2030 will be limitedas it will affect only a few Chinese factories.

“Assured Mutual Destruction”

Aside from the economic advantage the island represents, China has long pushed to integrate the region, which it considers part of its territory. Taiwan is an independent country after the country’s civil war ended in 1949 Communist victory of Mao Zedong. The defeated retreated to this region, where they ruled for decades. However, Beijing has always considered it another province of its country and has committed itself to “reunification”.

Economic incentives accelerated this need, and the possibility of armed conflict became an increasingly pressing reality. In fact, during 2023, China has been conducting more and more military maneuvers in the Strait of Formosa. According to US Indo-Pacific chief John Akilin, China has been preparing a military assault since 2020, adding 400 warplanes and 20 warships to the operation. According to Aquilini The idea would be to invade in 2027.

If this happens, the remote shutdown will apply to ASML’s line of extreme UV machines, of which TSMC is the largest customer. Ultraviolet (EUV) equipment uses high-frequency light waves to print the smallest microchip transistors which exist, creating processors using artificial intelligence, as well as for the most sensitive military applications.

“An invasion would be absolutely devastating to the North American economy”

In any case, it is clear to experts and policymakers that “guaranteed mutual destruction” will occur if Taiwan’s semiconductor industry is “shut down.” In the same week, the US Secretary of Commerce Gina Raimondo spoke on this topic. Whether or not China succeeds in capturing TSMC’s production (whether they can use it or not), the result will be “absolutely devastating to the American economy“. A senior official said that 92% of the state-of-the-art chips needed by the US for various industries come directly from this company.

Adding the chip’s impact on other key industries on the island, the Center for International Strategic Studies estimates that an invasion of the island would cost the global economy $10 trillion, ie. about 10% of world GDP, “clearly overcoming the war in Ukraine, the Covid pandemic or the financial crisis of Lehman Brothers”.

For the chip industry as a whole, the availability of Dutch machines is different. Last month, Intel became the first company in the sector to use the brand’s next generation machine (TWINSCAN EXE:5000). The American company worked for weeks on the installation of the equipment, which prints tin at a temperature of 220,000 degrees, the heat is 40 times greater than the heat of the Sun’s surface. This gives an idea of ​​how complicated the whole process is and allows us to understand why the United States wants to deprive China of the most advanced technology.

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