Here's How – Here’s How 148

Brendan is the Labour Party TD for Wexford, and former party leader.

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So, we’re talking about a war.

We’re talking about a war where a huge, nuclear-armed superpower, attacks a territory to its south that this formerly-communist superpower views not as a real country, it views but as an integral part of its own country, and the superpower’s nationalist leadership is still pretty sore about how this territory got to be independent in the first place.

To rub salt in the wound, this territory is doing much better, and is certainly much more democratic than the superpower; and another point of aggravation, this territory is politically much closer to the west, the United States in particular, and is receiving a huge amount of military aid from the west, and even though it is said to be exclusively for defensive use, the superpower sees that aid as a direct threat to its own security.

And the war has the potential to have dramatic economic effects on the whole world, not to mention the danger of spreading into conflagration that could result in a world-wide nuclear war.

And, thankfully, the war has not happened yet. The superpower is China, the territory is Taiwan and the parallels with the Russian attack on Ukraine are striking, even if there are some important differences.

One of these differences, one vital difference, is that this war, this potential future war, even though it’s not in the headlines, it’s getting a huge amount of attention from the administrations in Washington and Beijing, and probably elsewhere. If we’re lucky, the war may never come, but the people that matter aren’t taking that risk. They aren’t shouting and beating drums about it – not yet, anyway – but they are gaming out scenarios, making contingencies, and planning for all eventualities.

And, have no doubt about it, they are preparing for the possibility of war. Maybe a war where China overwhelms Taiwan within hours, maybe one where Taiwan manages to defend themselves, maybe they get American aid do that, maybe – though I think that’s unlikely – maybe the Americans intervene directly.

Or maybe there will be no war at all. That last possibility is actually more interesting than you might consider. Think of the huge level of military spending, the effort and the time that Finland puts into its defence forces. It’s basically the last country in Europe to have universal male conscription into the army. They have a huge amount of military hardware, on a par with Germany or the UK, despite having a population about the same as Ireland.

So, that’s huge for Finland, but it’s still tiny by the standards of the obvious aggressor, Russia – it’s even tiny by the standards of Ukraine. Why bother? If Russia wants to invade, they invade. Does it make sense to devote such a big chunk of the economy and society into preparing for a war that might never come, and if it does, they would lose anyway?

Actually, it does make sense. The Finns can’t change fact that the Russians would win such a war – at least not until they join NATO, but that’s a different story – they can’t change that the Russians would win, but they can change what it would cost the Russians to win.

All the Finnish military service, military hardware, military planning – it’s not aimed at making Russia not win, it’s aimed at making the cost of winning so high that the Russians will see it as not worth the effort.

That’s the strategy that is being thought about in Washington and Beijing, and Taipei, and probably elsewhere, about a possible Chinese invasion of Taiwan also.

We should understand just how offended China is by the very existence of Taiwan. Because of Chinese pressure, only 13 countries – one of them the Vatican – have recognised Taiwan officially. Taiwan can’t join the United Nations, and China reacts furiously to any hint at Taiwan’s international legitimacy as an independent country, and puts huge diplomatic and other pressure on anyone they can to exclude Taiwan from all international organisations.

You might remember this attempt by a Hong Kong journalist to ask the Canadian WHO official Bruce Aylward over Skype about the success of suppressing the corona virus in Taiwan – Taiwan was notably more successful than China.

Aylward stares blankly at the camera for about eight seconds, then this.

Aylward can then be seen reaching towards his keyboard and the line disconnects. The journalist calls back and tries again.

Then Aylward hangs up again.

To be fair, Taiwan was part of China. It’s a small island, off the Chinese coast, less than half the size of Ireland, but with a population of about 24 million. After the defeat of the Japanese in World War II, there was a civil war in China, between the communists and the nationalist Kuomintang; the communists won, obviously, and the Kuomintang evacuated to Taiwan, and the communists weren’t strong enough at the time to pursue them.

The Kuomintang first ran Taiwan essentially as a fascist one-party state, they claimed to be the legitimate government of the whole of China. In fact, western countries recognised them, ludicrously, as the legitimate government of the whole of China up to the 1960s, when Nixon started his rapprochement with what was then called Red China.

Something else changed in the 1960s too. Taiwan transformed into a multi-party democracy with a hugely successful economy. That sentence doesn’t do justice to the enormity of the transformation. Taiwan is listed in the top 10 most democratic countries in the world, just below Ireland actually, it and New Zealand are the only two countries outside Europe in the top 10. It also scores very highly on GDP per capita, the human development index, and in education.

It’s really a huge achievement. In 50 years the place went from a fascist dictatorship with people trying to scrape a living out of the dirt, to somewhere where all the economic and social indicators match Scandinavia, not Asia.

They lead the world in a whole bunch of high-tech industries. But the really important one here is chips. This is really, really important. This is world-war-three important – seriously.

Let me tell you why. Chips are important. Silicone chips, not deep fried. Chips go into computers of course, and they go into all the other devices that are really computers, but disguised as our phones, smart watches, smart speakers and so on. But they go into almost all other manufactured products as well.

You know those nasty printers that won’t let you print if you don’t refill with an outrageously expensive cartridge from the manufacturer? The cartridge has a chip in it. Your Leap card has a chip in it, as does of course the device on the bus that you blip it with. And if you are driving, you will know that car prices, even of second-hand cars, shot last year up. That’s because car manufacturers couldn’t get enough chips to run all the electronics that are in cars these days.

That’s right – car plants are sitting idle, because the chip manufacturers can’t supply them with enough chips, and that has a knock-on effect on the used car market.

Now, there are different types of computer chips, some very basic ones that might be in that printer cartridge, or in a 1980s-style digital watch, up through the ones in devices like credit card readers, in smartphones, office and home computers, and then ones that don’t come on the retail market, like the ones that go into servers, the types of computers that run the internet and telephone backbone, and – even more specialist – AI bots and high-end military equipment.

Basically, the more specialist, more sophisticated, more powerful the chip, the more difficult it is to manufacture. Difficult, in this case, means that you need very highly skilled staff, and very specialist equipment. Very, very specialist. So specialist, that there is basically one company on the planet that makes the equipment that makes the high-end chips. It’s called ASML, it’s based in the Netherlands, and its main customer is TSMC, which stands for Taiwan Semiconductor Manufacturing Corporation, which is based, you guessed it, in Taiwan.

ASML has 67 per cent of the world market in manufacturing lithography machines – that’s what they’re called – but they totally dominate the upper end of the market. So, if you want some chips for basic household electronics, you can probably source them in China, for high-end computers and smartphones, you are very likely getting them from Taiwan, and if you want the sort of thing that powers the internet backbone, computers doing serious AI, or sophisticated weapons, then Taiwan is the only show in town.

Remember that a small tightening in the supply of chips played havoc with the supply of both new and used cars. A war in Taiwan which disrupted or destroyed a large chunk of the world’s supply, and killed or forced into military service the highly-skilled staff that make them would be an apocalypse for the electronics industry, and that includes basically anything we buy, because even if a product doesn’t have a chip in it, our ability to make and move and sell it is totally dependent on electronics.

It is impossible to overstate the impact that this could have, particularly because Taiwan supplies almost all of the high-end chips that run big stuff like the telephone network, the internet and sophisticated weapons systems. If that supply was cut, we would have the electronics we have, but nothing new, no development, no replacements.

And you know who is really dependent on chips from Taiwan? China. Actually, China is probably the country most dependent on Taiwanese chips. First, that’s because they have a huge electronics industry the depends on Taiwan for its vital components, both for export and for the home market, but also because China is fast developing economically, and probably needs to be for its own internal social and political reasons.

However much the west could be hurt by a huge chip shortage, China would be hurt more, because the installed base would keep the west going, more or less, but China can’t make do with what they have and grow their economy the way they need to.

So, like Finland, that’s part of the cost of any invasion that would have to be calculated; another calculation would be the likelihood that the equipment in those Taiwanese chip factories is mined, to be destroyed if a Chinese invasion began. One way for China to mitigate that cost would be to develop their own chip manufacturers. China has shot up the value chain in terms of the products they produce in recent years, but this is a whole new Great Leap Forward, they don’t even have the ability to make the machines that make the chips, let alone the ability to make the chips.

And they don’t really have the highly qualified workers either. That’s where the President Biden’s executive order on 21 October last, just as the Chinese Communist Party’s 20th congress the started comes in. As Xi Jinping was crowned the first leader since Mao with an indefinite term as president, the Biden administration hit them with sanctions that don’t sound impressive, but in reality is not much short of a declaration of war.

They have hugely tightened the sanctions on supplying China with high-end chips, or supplying them to Chinese companies operating outside China, and the supply of high-end manufacturing equipment, and the know-how behind it, and this is the really swinging one: no American citizen can work for a list of Chinese companies, directly or indirectly, anywhere in the world. The ban extends even to non-Americans who hold US Green Cards.

The implementation is complex, but basically any company with any Americans on staff can’t do business anywhere in the world with any Chinese firm trying to expand the capability of China to enter the chip market. The severity of this makes the sanctions on Russian oligarchs look like a parking ticket.

It might work. It might not – in the long term, it could motivate the Chinese to develop their own, totally independent industry. For now it is a big hit to the Chinese high-tech industry.

But either way, outside the Russian invasion of Ukraine, that is unquestionably the biggest story of 2022.