The political consensus that Taiwan’s concentration of advanced semiconductor production represents a strategic vulnerability has produced a global effort to disperse that production — or at least to replicate enough of it elsewhere that a Taiwan Strait crisis does not produce a complete collapse of advanced chip supply. TSMC is building fabs in Arizona, in Kumamoto and Hokkaido in Japan, and in Dresden, Germany. Intel is building in Ohio and Germany. Samsung is expanding in Texas. The CHIPS Act in the United States, the European Chips Act, and Japan’s semiconductor subsidy programs have collectively directed tens of billions of dollars at this dispersal objective. The effort is serious, expensive, and insufficient on the timescale that matters most.

European governments have spent the past four years discovering that their economic exposure to Taiwan is larger and more structurally significant than their political frameworks were designed to address. The semiconductor dependency is the most acute dimension: European automotive manufacturers, industrial equipment producers, telecommunications companies, and defense systems contractors all depend on Taiwanese chip production for components that have no short-term European substitute. A Taiwan Strait conflict that disrupted semiconductor supply would hit European industry within weeks and would affect European defense procurement on timescales that matter for the continent’s own security.

Taiwan generates electricity from a combination of natural gas, coal, nuclear, and renewables. It imports virtually all of its fossil fuels by sea. The natural gas arrives as LNG on specialized tankers that dock at regasification terminals on the island’s coasts. The coal arrives on bulk carriers. The oil arrives on tankers. Every BTU of hydrocarbon energy that Taiwan consumes has crossed the waters that surround it, and in a blockade scenario, every BTU of hydrocarbon energy that Taiwan consumes would come from reserve stocks that are being drawn down and not replenished.

India fought a border war with China in 1962, has had active military clashes with Chinese forces along the Line of Actual Control as recently as 2020, and maintains a territorial dispute with China that has never been formally resolved. It is a member of the Quad alongside the United States, Japan, and Australia. It has been deepening security cooperation with the United States, Japan, and Taiwan itself through informal technical and commercial channels. And yet India’s position on the Taiwan Strait remains studied ambiguity: it recognizes the People’s Republic of China, does not formally recognize Taiwan, and has consistently declined to make explicit statements about what it would do in a Taiwan contingency.

Kinmen Island sits approximately 3.5 kilometers from the Chinese city of Xiamen. On a clear day, residents of Kinmen can see the skyline of a Chinese city of five million people across a strip of water narrower than the distance between Manhattan and Staten Island. Taiwan has administered Kinmen since 1949, when Nationalist forces successfully repelled a PLA amphibious assault that, if successful, might have changed the entire trajectory of the civil war’s outcome. The island has been shelled, blockaded, and fought over. It is still Taiwanese. Its continued existence as a piece of Taiwanese territory three kilometers from the Chinese mainland is one of the more remarkable geopolitical facts of the twentieth and twenty-first centuries.

Financial markets have been incorporating Taiwan Strait risk into asset prices with increasing explicitness over the past several years. The process is imprecise — markets price many risks simultaneously and isolating the Taiwan variable from the broader China risk premium, the global technology sector risk, and the general geopolitical uncertainty that has elevated risk premiums across multiple asset classes is methodologically challenging. What is clear is that investors who price Taiwanese assets, technology sector equities, and securities with significant Taiwan supply chain exposure are applying a discount that was not present a decade ago and that has grown as the military and political indicators have deteriorated.

South Korea is an American treaty ally. It hosts 28,500 American troops, maintains one of the largest and most capable military forces in Asia, and has built its security architecture around the American alliance since the Korean War armistice of 1953. In any straightforward reading of alliance logic, Seoul should be a reliable partner in a Taiwan contingency. The reading is not straightforward. South Korea’s Taiwan position is defined by a set of structural constraints that make explicit commitment to Taiwan’s defense politically impossible in Korean domestic politics and strategically dangerous given Korea’s specific vulnerability profile.

Singapore’s founding prime minister Lee Kuan Yew described his country’s strategic situation as that of a small nation living in a dangerous neighborhood, whose survival depends on making itself indispensable to every major power simultaneously. His successors have maintained this framework with considerable sophistication. In the context of the Taiwan Strait, it produces a position that is carefully calibrated to avoid giving either Washington or Beijing grounds to treat Singapore as aligned with the other: Singapore maintains deep security cooperation with the United States, hosts American naval vessels at Changi Naval Base, allows American surveillance aircraft to operate from Paya Lebar Air Base, and simultaneously maintains an economic and diplomatic relationship with China that it regards as equally essential to its prosperity and security.

Taiwan launched its first indigenously designed and built submarine in September 2023. The vessel — named Hai Kun, or Narwhal — represented the culmination of a program that was announced in 2016, funded against significant domestic political opposition, and executed despite the near-total unavailability of normal defense industrial cooperation channels. No major submarine-building nation would sell Taiwan a complete submarine. The United States, which provides most of Taiwan’s conventional weapons, does not export submarines to any partner. Taiwan built one anyway, with foreign assistance obtained through channels that required deliberate diplomatic ambiguity from the governments whose citizens and companies were involved.

Taiwan cannot always buy what it needs. Major defense suppliers limit what they will sell to avoid diplomatic friction with China. American export control legislation restricts the transfer of sensitive technologies. Treaty allies of China will not sell Taiwan weapons at all. The result of these constraints, accumulated over decades, is that Taiwan has been forced to develop a domestic defense industrial base capable of producing the systems it cannot obtain externally — and in several categories, the systems it has developed domestically are among the most important in its order of battle.