Growing Tension
“We Chinese on both sides of the Taiwan Strait share a bond of blood and kinship. The reunification of our motherland—an inevitable trend of the times—is unstoppable!” This is just one of the many warnings that Xi Jinping, President of the People’s Republic of China (hereinafter “China”), has issued on the Taiwan issue, this time during his traditional New Year’s address delivered on December 31, 2025. Indeed, blood ties and kinship do exist, but since 1949—when Communist troops forced Chiang Kai-shek’s Nationalists to retreat to the island of Formosa—the Republic of China–Taiwan (hereinafter “Taiwan”) has gradually developed a distinct political and national identity. According to the latest surveys by National Chengchi University, 88% of the island’s citizens favor maintaining the status quo between China and Taiwan, and 63% identify as “Taiwanese only,” compared to 2.5% who feel they are “Chinese only.”
Historically, Taiwan’s de facto independence has been made possible by the United States’ desire to preserve the balance of power in the Strait, initially ensured by a military alliance between Washington and Taipei that lasted until 1979, and later by a diplomatic agreement centered on the U.S. One China Policy. The U.S. acknowledges China’s One China Principle, according to which Taiwan is an inalienable part of China; however, it does not refrain from providing the island with defensive capabilities in order to deter Beijing from any attempt at unification. This triangular relationship—deliberately ambiguous and contradictory—owes its longevity primarily to U.S. military superiority, including in the Indo-Pacific. Now, this superiority is being called into question by some U.S. analysts, who point out that the modernization of the People’s Liberation Army (PLA) has fundamentally begun to shift some of the dynamics on the ground in China’s favor.
According to the ODNI’s report from March 2026, Beijing has not set a specific deadline for the annexation of Taiwan, but as early as 2023, the CIA reported that Xi Jinping had ordered the PLA to be ready for military intervention on the island by 2027. The invasion would be merely the culmination of a strategy of gradual coercion that Taiwanese people are already facing on an almost daily basis. China, in fact, makes extensive use of “gray zone” tactics: from disinformation campaigns aimed at demoralizing the Taiwanese people to the intimidating use of the coast guard; from economic coercion to the sabotage of Taiwanese infrastructure; and even to displays of military power in the Taiwan Strait—the most dramatic of which occurred in August 2022 during U.S. House Speaker Nancy Pelosi’s visit to Taipei.
Against this backdrop of growing tension, then-President Joe Biden stated on four separate occasions that, in the event of a Chinese invasion, the United States would intervene to defend the island. The administration later downplayed these statements, reaffirming U.S. strategic ambiguity, but the message the President intended to send to the leaders of the Chinese Communist Party (CCP) is clear and deliberate. In November 2025, in an interview with CBS News, President Trump was more cautious. When the reporter asked him if he would deploy the military in the event of an invasion of Taiwan, he replied, “You’ll find out if it happens, and he (Xi Jinping) knows the answer.” A month later, the administration announced an $11.1 billion arms deal for the island—the largest in the history of U.S.-Taiwan relations. Then, in May of this year, Trump traveled to Beijing for a summit with Xi Jinping, where Taiwan and semiconductors were central topics. As reported by Axios, some White House officials returned from this meeting with fears that China could invade Taiwan within the next five years.
The World’s Chip Factory
To understand Taiwan’s importance to the West (and to China), one must consider its economic significance. The island, with a GDP nearing one trillion dollars, ranks 22nd among the world’s economies. It plays a prominent role in trade, ranking 12th in exports, accounting for 2.4% of global exports. However, it is Taiwan’s role in the semiconductor industry that makes it a fundamental and irreplaceable geopolitical hub.
In 1985, Taiwanese Prime Minister Kwoh Ting-li decided that Taiwan should become a leading power in the technology of the future: microchips. He therefore summoned Morris Chang to Taipei, a pioneer in semiconductor technology who had trained at the U.S. company Texas Instruments. The prime minister gave him carte blanche and substantial government funding to create a foundry capable of producing semiconductors that could compete with those from the U.S. and South Korea. At the same time, the first fabless companies were beginning to emerge in the United States—a new business model that eliminated the fab, or manufacturing facility, to focus solely on chip design. Chang’s model, based on large-scale production as a service to design firms, quickly took hold, and within two decades it reached the pinnacle of global semiconductor production, realizing Li’s vision—Taiwan’s economic miracle.
Today, the U.S. still leads the way in chip design, with approximately 50% of the global market share. However, only Intel maintains most of its production on U.S. soil and barely ranks among the companies capable of manufacturing cutting-edge logic chips. The vast majority of the most advanced chips are produced in Taiwan by the company founded by Chang, the Taiwan Semiconductor Manufacturing Company (TSMC). Semiconductors can be divided into three main categories: The first is analog chips, for which outdated production technology is often sufficient; thousands of companies worldwide operate in this field. Then there are memory chips, capable of storing information. Here, production is primarily limited to three companies: the American firm Micron and the two Korean giants, Samsung and SK Hynix. Finally, there are logic chips, which differ from the other two major categories of semiconductors due to the extreme level of sophistication required to produce them, as they consist of silicon segments measuring just a handful of nanometers. The latest-generation logic chips can only be manufactured using complex extreme ultraviolet (EUV) lithography equipment developed and produced exclusively by the Dutch company ASML. Due to the extremely high cost of this technology and the technical expertise required to use it, very few companies possess it. Most of this equipment is located in TSMC’s fabs. Precisely for this reason, Taiwan produces more than one-third of the world’s logic chips and accounts for over 90% of the production of next-generation logic chips. These include the microprocessors powering data centers worldwide and the graphics cards—to which the American company Nvidia owes its enormous success—that are essential for the operation of artificial intelligence. The race to control the production of next-generation logic chips is therefore part of the broader technological competition among world powers.
The Taipei government, which had recognized the strategic value of producing advanced wafers and chips as far back as the time of K. T. Li, uses Taiwan’s excellence as a strategic lever and a key element of deterrence. The “silicon shield” that defends the island remains its most precious resource: Taiwan promotes interdependence within the international community’s semiconductor supply chain by opening fabs in third countries, including the U.S. and China—the latter benefiting from two long-standing TSMC facilities in Nanjing and Shanghai. Italy, too, benefits from this interdependence. In fact, the Taiwanese company GlobalWafers recently launched a partnership with the Italian-French firm STMicroelectronics, establishing a silicon wafer factory in Novara, with wafers ready for use in the fabs in Catania and Agrate Brianza. However, the capacity of these dispersed facilities is limited to “mature nodes”; in other words, they do not reach the level of competitiveness of the plants on Taiwanese soil. This strategy—aimed at exerting economic influence without relinquishing its technological leadership—makes Taiwan an international player with significant bargaining power.
Since the first Trump administration, the United States has been engaged in a tug-of-war with Taiwan, which recently materialized in the attempt to bring 40% of advanced chip production to U.S. soil. Avoiding a head-on confrontation, the Taiwanese government has allowed greater investment in the fabs already operating in Arizona but has rejected Washington’s request, which Deputy Premier Cheng Li-chiun called “impossible.” This U.S. effort, along with the Chips Act, the European Chips Act, and the Pax Silica initiative, is nothing more than a unified and coordinated effort by the West to prepare for the possibility of an event—such as an amphibious invasion or a naval blockade of Taiwan—that would be critical for global semiconductor supply chains. The reality is that in such an event, the damage could only be mitigated, not prevented; therefore, Taiwan remains and will remain essential for years to come, perhaps even decades.
Not Just the Economy
The economic effects of a Chinese invasion of Taiwan would therefore be catastrophic: according to an estimate by Bloomberg Economics, losses could approach 10% of global GDP. However, economic reasons are not the only ones at stake; there are at least two other decisive factors. On the political-ideological front, Taiwan’s strong symbolic power must be emphasized. As former President Tsai Ing-wen has pointed out on several occasions, democracy is now a non-negotiable aspect of Taiwanese identity, and in fact, the island ranks among the top positions in all major international indices of democratic quality. The very existence of a free Taiwanese society poses a problem for the CCP, as it contradicts the narrative that the Chinese people can function only within an authoritarian framework of “socialism with Chinese characteristics.” It is no coincidence, in fact, that Xi Jinping makes the success of his “rejuvenation of the Chinese nation” project contingent upon unification with Taiwan. Abandoning Taipei—and its 24 million inhabitants—would be tantamount to inviting revanchist regimes around the world to make their own moves.
The other issue is strategic. Formosa was the Japanese Empire’s outpost par excellence, and Tokyo is well aware of its strategic value. The same applies to Manila. Both Japan and the Philippines believe that the fall of Taiwan would pose an existential threat to their countries. The island, in fact, is part of the so-called “first island chain” off the coast of China. This archipelago, stretching from the Philippines to Japan, serves as a natural barrier that makes it difficult for China to access the deep waters of the Pacific. Control of Taiwan would therefore allow Beijing to significantly expand its military reach and impose its hegemony over the Indo-Pacific region. An attack on Taiwan would, consequently, carry a high risk of regional escalation.
The “Porcupine” Doctrine
The Taiwanese government, with the support of civil society, is devoting increasing resources to ensuring Taiwan’s defense and survival as a free and autonomous political entity. In recent years, this imperative has had to contend with two fundamental realities: the substantial increase in China’s military capability and the expansion of threats beyond the strictly military sphere (as exemplified by the aforementioned “gray zone” tactics). The Quadrennial Defense Review published in March 2025 reflects Taiwan’s commitment to addressing precisely these two key aspects.
Tsai Ing-wen deserves credit for bringing the issue of defense back to the forefront of public debate, but she failed to change the paradigms of Taiwan’s military tradition. In fact, among the upper echelons of the Taiwanese military, a preference for a conventional military approach—relying on heavy, state-of-the-art equipment—still prevails. Current President Lai Ching-te is working to move beyond these paradigms. Supported by Defense Minister Wellington Koo, the Taiwanese president has incorporated into his political rhetoric the need—long emphasized by American partners—to shift the focus of defense toward asymmetric capabilities. According to the prime minister, Taipei has little chance of deterring China through an army equipped with state-of-the-art jets, ships, and submarines, since China will always maintain a numerical advantage in this area due to the disproportionate military budgets on either side of the Strait.
The alternative proposed by the Taiwanese administration is to adopt the so-called “Porcupine” strategy. This concept, long debated in Taiwan and abroad, is based on deterrence by denial. The cornerstone of this defensive military doctrine is to inflict maximum damage with minimal expenditure of resources. The goal is to deter the enemy by making it clear that the cost of war would be unsustainable—just as the porcupine deters a predator not by force, but with its quills. In practical terms, this is expressed through the adoption of decentralized and mobile missile systems, fast patrol boats armed with missiles, naval mines, drones, and other low-cost assets designed to exploit enemy weaknesses and capitalize on Taiwan’s strengths, such as the island’s favorable geography. In other words, the military model Taiwan should aspire to is the Ukrainian one, rather than the American one. Lai’s steps forward—such as the October 2025 announcement of the “T-Dome” project, a defense system inspired by Israel’s Iron Dome, and investments in the domestic drone industry—remain insufficient to date. Some critics point out that Lai’s rhetoric still lacks a systematic and concrete approach, reflecting the resistance of a segment of the Taiwanese elite to this conception of defense, as reported by the Stimson Center. The challenge for the Taiwanese administration is not limited to reforming the military apparatus but also extends to preparing civil society for the various dimensions of China’s hybrid warfare and implementing a credible resistance plan that goes beyond the very first days of a potential conflict.
Deterrence
Can Taiwan survive a Chinese invasion? The most plausible answer comes from a war simulation set in 2027 conducted by the CSIS: the combined forces of Taiwan, Japan, and the United States would be able to repel the invasion in most of the simulated scenarios. However, there are some considerations to be made. In all scenarios, the cost borne by the allies is enormous, both in human and military terms. The most striking finding is that China’s formidable missile capabilities would be able to eliminate 90% of U.S. air forces in the Pacific before they could even take off. The problem is not only the actual gap in military capabilities—which still seems to favor the United States and its allies—but also, and above all, deterrence. Given the growing instability in international relations and the increasingly common use of force, Xi might be betting that the Americans lack the resolve to sustain such a costly war. This suspicion is likely reinforced by the prolonged U.S. involvement in Iran.
While Xi Jinping lays the groundwork through purges within the military leadership, promoting an increasingly bombastic narrative, and building a formidable naval capability, regional allies are working to strengthen deterrence. Japan is abandoning its purely defensive doctrine and acquiring medium- and long-range weapons capable of striking Chinese territory, as part of the most extensive rearmament since World War II. Australia is increasing ammunition production—one of the most critical shortages for Washington and its allies—and positioning itself as a logistical base in the event of an attack on Taiwan. South Korea is preparing to independently counter any North Korean moves in a coordinated crisis scenario, thereby freeing up U.S. resources for the Taiwan front. Europe, on the other hand, is lagging behind, despite having concrete room for maneuver that has so far remained largely untapped: according to the ECFR, Europe should learn from the Russia-Ukraine war and impose severe, targeted trade sanctions (Beijing is now largely immune to financial sanctions), capable of convincing the CCP that an invasion of Taiwan would result in concrete and immediate damage to its key growth driver: exports. It could also encourage private-sector collaboration with Taiwanese companies for the transfer of dual-use technologies, as well as submarine and aerospace expertise. Italy, too, with its expertise in the naval sector, would have a role to play in supporting the Taiwanese people’s efforts to defend their freedom.
None of these tools, on its own, would be enough to stop a potential decision by Beijing. But their combined effect remains the only combination capable of making the cost of an invasion so high as to deter it. Economics and strategy are inextricably intertwined in the case of Taiwan: the silicon shield and military deterrence are two sides of the same coin. As long as the West and its regional allies can keep them together, Taiwan will continue to be the (fragile) fulcrum of the Indo-Pacific order.
