The official name of Taiwan is the “Republic of China” (ROC). It is a relatively tiny island of 24 million, situated within breathing distance of the giant mainland, which goes by the official name of the “People’s Republic of China” (PRC).
China had a communist revolution in 1949. In the civil
war, the nationalist government headed by Chiang Kai-Shek was driven to Taipei.
This Chiang Kai-Shek had been declared a victor of the WWII along with
Churchill, Roosevelt and Stalin. Taiwan alias ROC became a member of the United
Nations, as well as the Security Council. Mainland China alias PRC was denied a
seat, because there could be only one China,
and that was represented by Taipei. The start of the cold war and the
anti-communist feelings contributed to this bizarre turn of events. To recognize
Taiwan as the successor state of China was as absurd as say terming Lithuania
or Latvia as the successor of USSR after its collapse.
Communist China kept fighting to regain its deserving
stature, and Americans kept obstructing the attempts as much as they could.
Finally, in October 1971, UN passed a General Assembly Resolution (no. 2758) to
make communist China a UN member. It was also given a seat on the Security Council.
USA and a few other countries tried to retain Taiwan in the UN, but were
outvoted. Taiwan was expelled from the UN, because there could be only one
China. Till today, only 14 out of 193 UN members recognize Taiwan as a state. China
threatens to cut diplomatic relations with any state that dares to recognize Taiwan.
*****
Taiwan, unlike its big brother, is a democratic,
prosperous country. It is aptly one of the four Asian tigers.
The Taiwan Semiconductor Manufacturing Company (TSMC)
is one of the key reasons for its prosperity. When it comes to the most
advanced chips, TSMC produces 90% of them. Founded in 1987, it really took off
in 2012, with its first contract to make powerful chips for the iphone. Apple
got along very well with Morris Chang, the founder, whose priority was to
protect trade secrets. Even casual guests to TSMC had their laptops’ USB ports
sealed. Sales of 220 million iphone-6 units kick-started TSMC’s meteoric rise.
In 2009, Intel owned the chip making market. By 2020, Intel was nowhere.
Last year, TSMC made an operating profit of $20 bn on
revenues of $48 bn. It is now the world’s eleventh most valuable company. In
2020, 62% of its revenue came from North America and only 17% from China.
Its gap with rivals like Samsung and Intel is wide. It
will spend $100 billion over the next three years on advanced technologies.
Neither USA nor China can come close. Though Intel plans to make chips in
Arizona, USA is inching towards $15 as its minimum wage. Taiwan’s minimum wage
is $5.70. Cutting-edge chip factories (fabs) and thirty years’ experience keep
TSMC far ahead of any competition.
*****
In 2019, after Apple, Huawei was TSMC’s biggest buyer.
The chips sold to them were for smartphones and handset-makers like Oppo. The
USA has now prohibited TSMC from supplying to Huawei. To China, this must rank as
among the strangest stories related to Taiwan. It calls Taiwan its province,
but the USA can forbid a Taiwanese company from supplying chips to a Chinese
company.
The world can see what China is doing in Hong Kong. It
would like to bring Taiwan under its wings as well. In the past, when China tried,
America threatened military action. Now located next to Taiwan, China has a war
fleet of 360 ships, compared with America’s 297. And China has the home
advantage.
Semiconductors are the new oil. Every superpower would
like to control chips. And the best way to do it is to control TSMC. Last
month, newspapers were writing about a possible USA-China war over Taiwan. USA
intelligence says it can happen within six years.
One hundred years ago, a pandemic followed a World
War. This time, history could happen again, in reverse.
Ravi
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