Rising Tensions Between China and Taiwan: Concerns Over Global Chip Supply

4 min Reading Time

Taiwanese manufacturers dominate large segments of the global chip industry – yet most of their production takes place in mainland China. Meanwhile, the People’s Republic of China has recently intensified its threats to bring the island under its control by force if necessary. Not surprisingly, concerns about chip supply chains are mounting – confirmed by a new Bitkom study.

One could side with the optimists and hope that the People’s Republic of China, as in the past, is merely rattling its saber – issuing hollow threats to eventually absorb what it considers its “renegade province” of Taiwan. After all, the status quo of a divided nation has served both sides well so far. Yet, amid a world already scarred by numerous military conflicts, the risk of an actual armed confrontation has never been more real.

Each year, roughly half of all global container shipping – and more than one-fifth of worldwide maritime trade – passes through the Taiwan Strait, the narrow waterway separating the two rival Chinas. At the same time, Taiwan commands vast swaths of the global chip industry: 90% of the world’s most advanced semiconductor products are manufactured directly there, while the remainder is produced by Taiwanese firms operating in mainland China.

92% of Respondents Share the Concern

In Germany, fears are mounting that China may this time follow through on its threats – according to a survey commissioned by the German digital association Bitkom. A striking 92% of companies that work intensively with semiconductor products consider China’s threats against Taiwan alarming in light of current chip supply conditions.

The chip dependency on Taiwan is causing global anxiety – any escalation with China could destabilize the entire global tech industry. (Unsplash / Adi Goldstein)

Only 37% of these companies still trust the United States on this issue; just 27% express “strong” or “rather strong” confidence in chip deliveries across the Atlantic. By contrast, 48% have only “low” confidence in U.S. chip supply chains – and 14% report having “no confidence at all.”

These findings stem from a representative survey of 503 German companies employing at least 20 people and either working with or relying on semiconductor products. The respondents are predominantly drawn from manufacturing, IT, and telecommunications sectors.

“Semiconductors lie at the heart of international economic conflicts,” says Bitkom President Dr. Ralf Wintergerst, adding: “We therefore need a robust ecosystem of semiconductor-related companies in Germany and Europe. Only then can we reduce dependencies – and become less vulnerable to coercion.”

USA Remains Top Supplier – but German Trust Is Eroding

Ninety-one percent of surveyed companies use semiconductors; 80% rely on them directly for their business operations and deem them indispensable. Seventy-two percent of chips already purchased – or planned for purchase in 2025 – come from manufacturers headquartered in the United States; 63% come from firms headquartered in China. German suppliers rank third, contributing around 54% of deliveries; Japanese companies follow in fourth place, accounting for 36%. Twenty-eight percent of companies source semiconductors from Taiwanese firms, 27% from South Korean ones, and 26% from other EU countries.

Yet despite relocating much of their production to mainland China, Taiwanese manufacturers – including TSMC, the world’s largest foundry – still exert dominant influence over the global chip industry. A direct conflict in the strait would therefore severely disrupt both the semiconductor sector and global trade.

“Semiconductors power smartphones, medical devices, cars, industrial plants, data centers, and communications networks – without them, many facets of our daily lives would grind to a halt,” warns Wintergerst. “Their production relies on a highly complex, globally interwoven network in which numerous countries are deeply entangled.”

Calls for a Domestic Chip Industry Grow Louder

Ninety percent of companies surveyed on behalf of the digital association demand that Germany end its one-sided dependence on external semiconductor supplies. Eighty-six percent view a strong domestic semiconductor ecosystem as vital to national security. While the supply situation has improved compared with earlier Bitkom surveys conducted in 2023 and 2021, 60% of companies that have already purchased semiconductors for 2025 still report difficulties sourcing them domestically.

Accordingly, 86% call for increased subsidies to support domestic chip manufacturing or the construction of semiconductor fabs in Germany. Eighty percent also want tax incentives and policy support for customers who procure chips from domestic industry. The German federal government is developing a comprehensive strategy covering the entire value chain.

Bitkom President Wintergerst explicitly welcomes this initiative: “To strengthen our competitiveness and supply security, we must consistently expand Germany’s semiconductor location – with domestic manufacturing capacity, world-class design expertise, and attractive framework conditions for skilled professionals from around the globe.”

Header Image Source: Unsplash / Thomas Tucker

Continue reading on cloudmagazin.com

• IT Compliance in Growing Companies: Identifying Risks Early
• Liquid Cooling in Data Centers – A Rapidly Expanding Market
• Germany Holds Its Own in the Global Semiconductor Market

More on this topic: Further articles on mybusinessfuture

“Europe’s own fabrication capacity covers only a fraction of demand – the EU Chips Act aims to change that, but will take years.”

Frequently Asked Questions