KEY POINTS

  • An analyst said he thinks China will 'nationalize' TSMC if the country seizes Taiwan
  • A senior Chinese economist previously urged the government to take over TSMC if the U.S. sanctions China
  • Pelosi met with Taiwanese leaders and the TSMC chairman Wednesday
  • TSMC is the world’s biggest chipmaker

On the heels of House Speaker Nancy Pelosi’s visit to Taiwan, analysts have raised concerns about how Taiwan Semiconductor Manufacturing Co. (TSMC) would fare should China invade Taiwan in any way, considering the critical role the world’s biggest chipmaker plays in the global industry and fragile U.S.-China relations.

Abishur Prakash, the co-founder of advisory firm Center for Innovating the Future, told CNBC through email that he thinks China will “nationalize” TSMC and “begin integrating the company, and its technology, into its own semiconductor industry” if the Chinese government decides to invade Taiwan.

Prakash explained that while TSMC “has already picked sides,” it has yet to be clear if the chipmaker will “be able to maintain its position (aligning with the West), or will it be forced to recalibrate its geopolitical strategy.”

In June, Chen Wenling, the chief economist at the China Center for International Economic Exchanges, urged the Chinese government to seize TSMC if the United States hits China with sanctions similar to the ones Washington implemented against Russia, Bloomberg reported.

While Beijing has not confirmed anything about the call to seize TSMC, Chinese Foreign Ministry spokesman Zhao Lijian said ahead of Pelosi’s Asia visit that if the House Speaker visits Taiwan, it would be “a gross interference in China’s internal affairs,” Reuters reported. Zhao warned further that China “will take resolute responses and strong countermeasures to defend its sovereignty and territorial integrity.”

Taiwan is a self-ruled island, but China considers it a part of its territory.

On Wednesday, Pelosi met with Taiwanese lawmakers, Taiwanese President Tsai Ing-wen, and chairman of TSMC Mark Liu, the New York Times reported. TSMC has a massive list of clients around the world, including Apple, Sony and Nvidia.

In response to Pelosi’s Taiwan visit, Chinese Foreign Ministry spokesperson Hua Chunying was quoted by the Chinese newspaper People’s Daily as saying that Pelosi’s trip to the island “sent a serious wrong signal to the ‘Taiwan independence’ separatist forces.” Hua said both “the U.S. and ‘Taiwan independence’ separatist forces will be responsible for all consequences arising therefrom.”

In an undated interview published by CNN this week, Mark said TSMC will be rendered inoperable if China invades Taiwan. “Nobody can control TSMC by force. If you take a military force or invasion, you will render TSMC factory not operable,” Mark pointed out. The TSMC chairman further explained that the chip manufacturer “is such a sophisticated manufacturing facility, it depends on real-time connection with the outside world.”

Taiwan’s Minister of Economic Affairs Wang Mei-hua echoed Mark’s sentiments in the CNN interview, noting that the island’s semiconductors will not be available to the global industry if China were to invade, the Taiwanese newspaper Taipei Times reported.

China has since announced that it will launch military exercises around Taiwan Thursday as tensions with the U.S. rise, CNA reported. The military drills are expected to take place within about 20 km off of Taiwan’s shore and will include “live-fire drills.”

Taiwan’s Defense Ministry confirmed Wednesday that China sent 27 warplanes into the island’s air defense identification zone, CNN reported. A flight map provided by the ministry showed that 22 Chinese jets crossed the median line of the Taiwan Strait ahead of its planned military drills.

Taiwan Semiconductor Manufacturing Company (TSMC) President and Co-Chief Executive Officer Mark Liu attends an investors' conference in Taipei, Taiwan April 13, 2017.
Taiwan Semiconductor Manufacturing Company (TSMC) President and Co-Chief Executive Officer Mark Liu attends an investors' conference in Taipei, Taiwan April 13, 2017. Reuters / Tyrone Siu
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