>That is a huge win for them and makes the Chinese mainland threat to assimilate Taiwan less? More fab capacity is a win.

No the opposite, TW is giving up their silicon shield due to pressure from various blocs. The chief global interest in defending TW evaporates and PRC calculus for reunification increases when enough critical semi productions moves off island. DPP / TW has been balancing a tight rope of placating demands for TSMC fabs outside of east asia and trying to trade it for some geopolitical wins. But really TSMC and TW has no choice, EU/US/JP all have sticks like tech sanctions of supply chains TSMC relies on, the carrots of subsidies and temporary positive geopolitical messaging around TW recently are consolation prizes.

I think TW hopes naively if they spread TSMC supply chain in enough countries, it would increase mutual dependancy and security. Instead, in scenario of PRC reunifying forcefully, host countries will just nationalize TSMC fabs on their soil. The entire point of TW's silicon shield is to concentrate fabs on TW to sustain uneasy detente. The more production moves off island the more opportunities for global demand to factor out TW fabs... which unlike Japan, Korea, NATO countries where new fabs are being proposed, explicitly does not have US security guarantee, i.e. TW fabs will become the most vunerable suppliers. This point is key. For PRC, having critical fabs concentrated on TW is a geopolitical gift, even if US can leverage them in peace time via sanctions, PRC can leverage them more during war time via disruption. Everyone knows this, no one will want to depend on TW fabs once suppliers on secure soil are established. TSMC / TW writing their suicide letter. I anticipate TSMC will do everything it can to delay these projects to buy more time.

I wonder what the situation with production capacity is. I suspect TSMC will build a fab here and there that might suffice to make enough to supply the military, but not for anything else. Large sectors of the economy would still be cut off from chip supply, and we've seen how that went with the car industry.

If PRC would conquer TW, they would not have an incentive to stop chip exports I think. Too much mutual dependency with the trade partners, and the party does not like domestic instability - unemployment would be unwelcome. Would TW blow up the factories though? It is said they can do this with a press of a button.

> EU/US/JP all have sticks like tech sanctions of supply chains TSMC relies on

Wouldn't that be self-sabotage? TSMC is in the strong position, everyone wants capacity, they have it. Intel and Samsung can't compete on the latest nodes.

I still think this is good for Taiwan’s security. The world is very aware of Chinas growing ambitions, and everyone views Taiwan favorably. Taiwan needs to focus on being viewed as the better partner to liberal democratic countries. I think USA will keep putting troops near or at Taiwan in the coming years. Very slowly as to not create a huge provocation, but still steady.

Taiwan doesn’t need the chip card to be considered worth supporting because a war between China and Taiwan will devastate the world economy in a hundred different ways. And regardless, it’ll take many decades before Taiwan isn’t such a large share of world chip production that they’d actually lose that card. Losing even 10% of the worlds cutting edge chip production would be utterly devastating.

If China attacks Taiwan, and American troops are harmed, the US will have the justification they need to join the war, and the public support theyd need. I don’t think the US wants to go to war. But they need a threat that’s as credible as possible to deter China.

> Losing even 10% of the worlds cutting edge chip production would be utterly devastating.

The alternative is losing ~80% of all global chip production on TW, JP, SKR soil if US decides to fight PRC over TW. That's the leverage PRC has in war scenario. Losing leading node is survivable, losing east Asian fab sets globe back decades, and hurts US/western tech industry the most.

A fundemental shift in region is US can't deter PRC over TW anymore. And as much as TW is viewed favourably, no one has committed to TW defense and US tried recruiting hard. Even US itself won't give TW security guarantee, and if you follow policy space, strategic thinking has shifted away from TW defense to TW armorer and blockading PRC past 1st island chain - increasing consensus and acknowledgement that TW is simply not defensible. Ultimately, no one wants to goto war and US can't deter PRC. So we have US and other blocs trying to maintain status quo for 10/15/20 years while shifting risk off TW sufficiently to mitigate esclation towards regional semi mutually assured destruction, a crisis much larger than just losing TSMC. Is this good for TW security? IMO it's not.

So what actually happens to fabs outside of Taiwan if China do take Taiwan and presumably also TSMC the company.

Really good question. I don't know.

What I would do if I were leading TSMC is create a wholly owned subsidiary which held all of the non-Chinese assets and headquarter it in a tax neutral country like the Netherlands. Let's call it TSMC International. Then in the event of an assimilation by China, sell all of the assets that TSMC the parent company owns, to TSMC-i for $1 or something. And in fact have the paper work at the TSMC-i headquarters all filled out just waiting for being dated and executed by TSMC-i executives.

It is a variation on a poison pill defense.

I think the going in position is that the fabs in Taiwan are not going to exist if China takes the island, so the only fab business will be outside fabs. I assume they have a continuity plan for one of the other offices to become the new HQ https://www.tsmc.com/english/aboutTSMC/business_contacts

Something like what happened with Arm China.

https://www.extremetech.com/computing/326447-arm-china-seize...

p.sm this was retracted. The new company is specifically specialising in extensions and add-ons. Or that was what they were told to re-write.

>Or that was what they were told to re-write.

Especially when they are in the middle of going thought M&A. Along with trying not to anger China which could retaliate.

Good question, but we'll probably have bigger problems, like a potential hot war, if that happens. How these problems get resolved ie "who wins" is the answer to what happens to TSMC.

Theoretically; something similar to what happened to the Cuban cigar producers after the revolution. They spin off into their own company/companies no longer recognizing the “invalidated” company charter.

But, realistically, China will press their global influence to keep them under Sino-TSMC’s control under a new Chinese corporate charter.

It will depend heavily on the amount of global sway China has at that point. I imagine the countries TSMC builds the fabs in would vastly prefer to use the invasion as an excuse to say the fabs belong under the control of a entity without connections to China.

Well one possibility is that those fabs will simply be nationalized by the country that they are in.

That would be an effective economic retaliation against a country that invades someone else like that.

They'll be spun off into different companies. That's usually what happens when multinationals get cut across by war.