US House Speaker Nancy Pelosi leads a delegation to meet with President Tsai Ing-wen in Taipei on August 3, 2022. Photo: Taiwan Presidential Office

During her just-concluded visit to Taiwan, US House of Representatives Speaker Nancy Pelosi vowed that America would not abandon the island, doubling down on support for the democratically elected government in Taipei, despite heightened threats of military action by China. 

Pelosi made her comments on Wednesday at a joint press conference with Taiwanese President Tsai Ing-wen.

Beijing, which regards Taiwan as part of its territory, was enraged. After her arrival, China’s military announced joint air and sea drills near the island, including test launches of conventional missiles in the sea east of Taiwan.

The US ambassador to China was also summoned by Beijing to rebuke him over Pelosi’s “egregious” trip, state media reported. Vice-Foreign Minister Xie Feng voiced “strong protests” over the visit. 

Taiwan has been an international diplomatic hotspot for decades. But the ruling Communist Party of China (CPC) appears to be taking an increasingly hardline stance, as we have witnessed with the Pelosi debacle.

So why is Beijing becoming more aggressive in its claims of sovereignty over Taiwan?

Is it because of the forthcoming CPC National Congress, which will in all probability hand President Xi Jinping a third term? Maybe.

However, I believe it’s more likely to be about technology. 

It’s difficult to exaggerate the importance of Taiwan to the global tech landscape – and, of course, nowadays whoever has the upper hand in tech has economic (and therefore political and military) dominance.

Taiwan dominates the microchip foundry market, or the outsourcing of semiconductor manufacturing. Its contract manufacturers together accounted for more than 60% of total global foundry revenue last year, according to data by research firm TrendForce.

Much of that dominance can be attributed to Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest foundry, which counts major technology firms such as Apple, Qualcomm and Nvidia among its clients.

In our tech-driven era of smartphones and other devices, the world cannot function as it currently does without semiconductors.

Beijing is becoming concerned that Washington wants to cut it off from Taiwan and its outsized role in chipmaking, thereby preventing China from increasing its global influence.

Although Nancy Pelosi’s visit has added fuel to these fears, it is not the trip itself, or the House Speaker herself, that is the concern for Beijing, in my opinion – it’s Taiwan’s unrivaled semiconductor-making capabilities on which China so heavily relies.

Against this backdrop, the US government should temper China’s fears that its economy could collapse because of future trade in microchips and, therefore, reduce the probability of international trade issues and/or war.

Nigel Green is the founder and CEO of deVere Group. Follow him on Twitter @nigeljgreen.