Tech’s Next Big Concern Will be Taiwan

Over the last two years, the US tech industry has had to deal with various issues and tariffs regarding trade with China. Issues like the Huawei ban, increased tariffs, and, most recently, China’s clampdown on Hong Kong.

It would be an understatement to say that the US-China relations have been bad over the last two years. The current US government is moving away from globalization, while China, at least on paper, is committed to it going forward.

The reality is that China, under President Xi, is marching towards a “buy” only Chinese policy in which they have more control over trade and business issues within China. If they had their way, they would also be the masters of the US and other countries companies for them to do business in China.

This parochial approach causes a great deal of concern by nations who trade with China and have companies inside China. They worry that over time, China could move even to nationalize companies that have offices in China.

I believe that China’s move to try and take control of any US or other multinational companies that operate in China will not happen anytime soon. However, in talking with companies with dedicated offices and businesses in China, they tell me this threat is now more severe than even two years ago.

There is another threat from China that has even more ramifications for the tech industry, and that is China’s position that Taiwan is part of China and needs to be back under their national control. This doctrine is called the “One China Policy.”

For decades, China has pushed this position but has not decided to take back Taiwan.
They make threats all of the time, and diplomatically speaking, they threaten the US and other nations not to recognize Taiwan as anything but a part of China.

The US has stopped short of recognizing Taiwan’s position that it is an independent country but has sold them military equipment and opened direct trade with them.

In 1979 Congress passed the Taiwan Relations Act “to pledge a continued moral commitment to Taiwan after official diplomatic relations were terminated. It stated America’s “expectation that the future of Taiwan will be determined by peaceful means” and declared that the use of force or coercion would be seen as “a threat to the peace and security of the Western Pacific area and of grave concern to the United States.” It committed to provide arms “of a defensive nature” to Taiwan.

For many years, I have traveled to Taiwan and read about how it became “estranged” from the People’s Republic of China. If you want to know more about its history, you can check this link.

While there has been a lot of saber-rattling in this area of the Pacific, the fact is that the US has not recognized Taiwan as an independent nation. To date, this has kept the US and China out of armed conflict.

However, the current administration has made some key moves in the last two months that might signal a US policy change, which has already gotten a hostile response from Beijing.

On August 9, the US’s highest-ranking official to visit Taiwan, Health and Human Services Secretary Alex Azar, led a delegation to Taiwan. They met with Taiwanese President, Tsai-ing wen, and health officials to discuss Covid-19 and other pandemic issues.

As you can imagine, China was not happy with this and let the US know about their anger.
On September 18, Keith Krach, Under Secretary for Economic Growth and the Environment, led a delegation to the memorial service for former Taiwan President Lee Teng-Hui. The Chinese leadership again protested this visit.

One big question in Washington is whether these meetings directly with top Taiwanese political leaders may foreshadow a US’s move to recognize Taiwan’s bid for independence formally.

It may be too early to read into this, but my contacts in Washington said to watch for any more high-ranking US officials to meet with Taiwanese leaders in the next few months. That could give us more indication of any changes in US Foreign Policy about Taiwan.

Although China’s threat of doing something to take back control of Taiwan has been a threat for decades, I am getting indications from top business leaders in Taiwan that they are the most concerned about this happening than ever in their lifetime.

The biggest short term fear is that China could try and bring Hong Kong like control to Taiwan. The second biggest fear is that they would make a military strike of some sort. I was told that China could start by taking over one of Taiwan’s disputed islands. They could take one of the Taiwanese islands to test the US and other countries’ responses. China would also have the option to an all-out military advance and impose their rule.

While the goal would be to unite Taiwan with Mainland China, the other prize would be the many ODMs and, more specifically, TSMC that could come under some Chinese influence or control.

Last week, the US put restrictions on Chinese based semiconductor company SMIC, which has angered China. The ban is not all-inclusive like it is with Huawei, but it is enough to make China angry.

After speaking with high-level tech execs in Taiwan and my contacts in Washington, who are now watching US and China relations related to Taiwan, I am deeply concerned about this area of the world. If China should move on Taiwan, its overall impact on tech nationally and globally could be enormous.

That said, I have a recommendation to make. All tech companies who have either operations in Taiwan or are closely involved with using or purchasing goods from Taiwan create a task force to monitor this situation and begin modeling worst-case, best-case scenarios.

I am not putting on my predictions hat and saying what will happen. But I can tell you that tensions in the China/Taiwan/US relations are close to being a powder- keg based on what I hear from Taiwan execs and Washington contacts.

Published by

Tim Bajarin

Tim Bajarin is the President of Creative Strategies, Inc. He is recognized as one of the leading industry consultants, analysts and futurists covering the field of personal computers and consumer technology. Mr. Bajarin has been with Creative Strategies since 1981 and has served as a consultant to most of the leading hardware and software vendors in the industry including IBM, Apple, Xerox, Compaq, Dell, AT&T, Microsoft, Polaroid, Lotus, Epson, Toshiba and numerous others.

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