It sounds like the premise of a cheap novelette: put 90 percent of the world’s most strategic industry in a tiny place caught between two superpowers and push those powers toward confrontation and war.
It’s a set-up that seems far-fetched until you consider that this is the real situation facing us with the semiconductor industry based in Taiwan. Almost all the high-tech devices farmers rely upon — including combines, tractors, sprayers and mobile phones — rely upon chips made in Taiwan’s semiconductor foundries. Actually, your pick-up truck does too.
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The entire grain industry relies upon chips made in Taiwan. Little happening at your local grain elevator, at the meat-packing plant, at ports, airports and on the railroads doesn’t rely upon sophisticated chips made in Taiwan, an island China pretends to own and that we in the western world pretend to recognize as a part of China while treating it like an independent nation.
If you were a farmer trying to buy a new F-150 during the pandemic, you experienced what happens when vital components of technology aren’t available to manufacturers. Chips and many pieces of complex machines like automobiles became temporarily unavailable as transportation systems shut down, factories closed and assembly lines were idled.
Those shortages and disruptions quickly lifted as life got back to normal after COVID-19 restrictions were lifted a year ago. That time is a tiny taste of the nightmares we’d face in any conflict over Taiwan.
It’s something we need to think about. It’s not like it’s unlikely. China has been building up its military for years specifically for an invasion of Taiwan. It’s something that China’s leader, Xi Jinping, appears to be hitching his historical legacy to.
China’s military is expected to be capable of invading Taiwan by 2027.
It isn’t inevitable. Far from it. Xi might be learning some lessons about military hubris from Russia’s abysmal performance in Ukraine. (The Russian military, by the way, is said to be stripping chips from fridges and other low-grade electronics after being cut off from world suppliers.) The U.S. might avoid escalating its provocative rhetoric to the point that China feels the need to do something to save nationalistic face.
But many less-than-war situations could shut down our access to Taiwan-produced chips. What if China blockades Taiwan and its exports are halted?
What if China bullies and coerces Taiwanese manufacturers into restricting supplies to western economies?
There are many ways we could end up losing access to the tiny chips that make almost everything run, including our refrigerators, dryers, washing machines and even our kids’ toys. It’s another risk we need to think-out before it happens.
What would we do? What would you do on your own farm if you couldn’t get access to any modern technology for an extended period?
It’s a crazy situation when 90 percent of something absolutely necessary is being produced in a place where the world’s greatest powers are beating the war drums.
Nobody knows how to deal with this risk. How real is it? Are we talking nearby, tangible risks, or theoretical risks?
According to Bloomberg News, 39 of 40 analysts who assess Taiwan Semiconductor Manufacturing Company have a “buy” rating on the stock, which suggests they’re not too scared about things going ballistic.
On the other hand, Warren Buffet slashed Berkshire Hathaway’s stake in TSMC by 86 percent at the end of 2022 due to the geopolitical tensions. Buffet isn’t known for being too stupid with investing.
Maybe there’s nothing to worry about. Maybe there is.
As a farmer, you’re in an increasingly high-tech, technology-dependant industry that relies upon chips.
Whatever happens, it’s going to affect you directly.
The world’s militaries run simulations, stage war games and operate preparedness drills about potential future wars.
Whether or not you’re keen to think about it, the risk of a Taiwan war is something farmers need to prepare for. The conflict might strike closer to home than you expect.
