Thursday, April 04, 2024
PMT: America's Taiwan Problem
If we learned anything from the pandemic, it should be the vulnerability we face to disruptions in the global supply chain. Right now, one of the most vulnerable parts of the world supply chain is Taiwan.
Here's why: Taiwan produces about 80-90% of the world's advanced computer chips, and over 60% of less advanced chips. These are the guts of your cell phone, your tablet, your laptop and even your car. A big part of the spike in auto prices after the pandemic hit was because of a disruption in chip production.
We don't realize how ubiquitous these things are (are at least I didn't). They are not only in what we recognize as electronic devices, but in almost everything else that has an electric current.
Taiwan's earthquake (which will disrupt manufacturing) reminds us of that vulnerability. The primary threat, of course, comes from China, which still views Taiwan as part of their territory despite the island's independence for the last seven decades.
The Biden Administration is spending about $39 billion to build up chip production in the US, but the efforts have been halting. New facilities probably won't be up and running until 2026 or 2027-- and that leaves a long period of deep vulnerability.
Probably it was a mistake to rely on an endangered island for so long as the primary supplier of such an important product-- but sometimes pure capitalism steers us that way.
