No War Please
With the current events in the world, it didn’t feel right to be writing about personal finance, borrowing against margin and interest rates. So, might as well write about what everyone is talking about: the current situation in Ukraine and possible China/Taiwan future.
Keep in mind I’m just a random guy on the internet, so take my opinion with a grain of salt. It’s okay if we differ in geopolitical opinions, but here are mine.
My Biased Background
First, let me admit that I, like everyone, have my own biases. I was born in Taipei, Taiwan. My father was born in Xi’an in China. My paternal grandfather is from the island of Hainan and was a general in Chiang Kai Shek’s Nationalist KuoMinTang Army.
After the KMT lost the civil war against the CCP in 1949, both my parents’ families fled to Taipei, Taiwan. My dad’s family lost their ancestral home in China, and I was told that my grandmother still held the deed until her death in 2007. One of my dad’s older brothers died from fever during the escape.
On my mother’s side, her oldest brother didn’t make it on the boat. When I was growing up, we often sent clothes and other necessities to his family in China. It wasn’t until 2012 when I first met my uncle’s family in Shanghai.
This shapes how I view the world as an underdog. Note that I moved to the US when I was 10, so I am in no way a China/Taiwan historical scholar.
My Take on Ukraine
I am watching the events unravel in Ukraine with an eye on the China/Taiwan situation. There are similarities but also differences.
My understanding is that while Russia claims national reunification as the reason to invade Ukraine, the real reason is the perceived NATO threat and oil/gas reserves in Ukraine and its Black Sea costal territories. If Ukraine develops its own oil/gas industry and strengthens EU relationships, it would not be good for business for Russia.
I’m no expert in Ukrainian politics, but they voted overwhelmingly (73% of popular vote) for the current president Volodymyr Zelenskyy, who is supportive of membership in the EU and NATO. It seems this triggered Putin.
Putin thought the invasion would be quick, but is finding unexpected resistance. He has yet to capture Kiev and other key cities. The Russian forces are running low on fuel and supplies, and has lost airplanes, helicopters, tanks, and troops. Logistics is hard. This is also probably not good for morale. Meanwhile, Ukraine is receiving more military supplies and even fighter jets from the EU.
With tough banking and SWIFT sanctions, Putin will lose access to more than half of Russia’s reserve currency. Banks will be unable to conduct business internationally, and normal citizens are starting to “bank run”. The Russian Ruble is tumbling in currency exchange value.
Russia has about $640B in reserve, but $400B is in US/EU currency in sanctioned western banks. Fighting this war at a run rate of $15B a day, the math says Russia has enough funds for maybe two more weeks.
While the destruction in Ukraine is undeniably devastating, it’s not yet clear whether David or Goliath will win. Putin probably underestimated the will of the Ukrainian people to defend their homeland, and coupled with western sanctions and domestic protests, find his path to a successful invasion much more difficult than anticipated. Let’s hope the nuclear threat is simply that. A threat.
(As of 2/28) I agree with the West’s initial strategy to tread carefully regarding the Ukraine situation. Any provocation could ignite a full out war in Eastern Europe and Asia. While the US’s “strategic ambiguity” Taiwan policy is indeed ambiguous, it is also the best policy to keep status quo and prevent war. Regarding Ukraine, the best strategy is to send military supply and financial aid, punish via sanctions, but keep troops out unless absolutely necessary. (Note this was written as of 2/28, and the situation changes quickly each passing day)
I bet the CCP is watching this situation. Closely.
Taiwan’s Story
China and Taiwan are technically still in a civil war between China’s Communist Party and Taiwan’s Nationalist/Democratic Parties. The two sides have operated independently since 1949 with differing views of the One-China Policy.
After WWII, Taiwan was recognized as the true China with western diplomatic relationships and was a founding member of the UN and one of five permanent members of the Security Council. That all changed when Nixon visited China in 1972, and by 1979, the West officially recognized China and removed Taiwan from all diplomatic and UN relationships.
While Taiwan’s once authoritarian Nationalist KMT party is generally more pro China reunification, the newer Democratic DPP party supports human rights and Taiwan identity. In 2020, Tsai Ing-wen of the DPP won the presidential election by a record 57.1% of votes.
At least to me, this is something Ukraine and Taiwan have in common vs. their larger Russian and China neighbors. Both Ukraine and Taiwan have governments and political views that are aligned with the Democratic west, and yet are under threat from a large communist neighbor with political ambitions of nationalistic reunification.
There is a reason that Lithuania and Slovakia have been strengthening ties with Taiwan. They’ve seen this movie before and know the script.
Most Americans think Taiwan will be next, and China will squash Taiwan like a bug. This is not that different than what they thought of Ukraine prior to the invasion.
What most Americans don’t realize is that Taiwan is a global technology leader and has much to offer to America’s economy.
Taiwan Semiconductor Manufacturing Company
Also known as TSMC (NYSE: TSM), Taiwan Semiconductor Manufacturing Company is the one of the world’s most important companies that you’ve never heard of.
Do you use Apple products? Do you have an iPhone, iPad, or Apple Watch? Do you plan on getting the new M1 MacBook? Or if you are a PC guy, are you building a gaming or mining rig using AMD Ryzen CPUs and Nvidia GPUs? Maybe you prefer Android phones with a Qualcomm Snapdragon chip? Maybe you have investments in Google, Amazon, or Tesla that need an Exaflop of compute power for next generation Machine Learning and Artificial Intelligence? Computer chips are the backbone of these trillion dollar silicon valley companies.
You don’t think these American companies make their own semiconductor chips in the US do you? Guess where they are made? Yup. By TSMC in Taiwan. TSMC makes over 90% of the world’s advanced semiconductor chips. Not 9%. 90%. NINE ZERO. Without TSMC, there would be no iPhone, iPad, or Apple Watch. Without TSMC, Silicon Valley would lose its hardware advantage. If you think we have a chip shortage now, imagine if Taiwan was under attack.
When it comes to the most advanced chips used in the latest iPhones, supercomputers and automotive AI, TSMC is responsible for 92% of production while Samsung is responsible for the other 8%, according to research group Capital Economics. (CNBC)
But these are just consumer products. Who cares? The United States Department of Defense does. The F-35 fighter jet uses computer chips made in, you guess it, Taiwan. There’s a reason TSMC is building a new fab in Phoenix, AZ. It will begin production in 2024.
In addition to the F-35 jets, TSMC makes U.S. Defense Department-approved “military grade” chips that may be used by some of its other American clients for classified military purposes. (Nikkei Asia)
Chip technology is measured in node sizes. The smaller the (theoretical) node size, the more powerful and energy efficient the chips get. TSMC and Samsung are the only companies that can make chips at 5nm. TSMC is on its way to 3nm nodes and advanced vertical chiplet technologies. These will makes future chips even more powerful.
How does this fit into geopolitics? In 2020, China’s telecom giant Huawei was sanctioned by the US from Taiwan’s semiconductor production. As a result Huawei literally has no more 5G chips. Don’t believe me? Take a look at their flagship phones. In 2022, their best smartphones are only 4G. Chinese consumers know this and even they are spending their money elsewhere.
For a moment, imagine CCP is invading Taiwan. What will the US, Japan, and Western Europe do? Watch TSMC fall into the CCP’s control? While we absolutely should support the Ukrainians for its Freedom and Democracy, Taiwan, as a trade partner, has semiconductor production capabilities that is unrivaled in the world. Whomever has access to Taiwan will be the dominant digital economies of the future. (If you think China can just copy the technology and make their own advanced chips, you may be disappointed.)
I hope I explained why the average American should care about Taiwan, and not just for its friendly people, amazing food and boba tea.
Uncertain Future
CCP knows about the West’s reliance on TSMC, and that the West knows it has to protect this resource. CCP’s best chance of success is by convincing the Taiwanese to surrender via threatening military flybys and government propaganda. The alternative is a costly invasion by sea with uncertain outcomes. Fortunately the Taiwanese are overwhelmingly in favor of their elected President whose party position is to protect Taiwan’s sovereignty. Taiwan will not fall for political games.
Like Putin, if the CCP miscalculates its invasion, the consequences could be existential. What’s Putin’s endgame if the Ukraine invasion fails? I don’t know, but it wouldn’t be good for him. The CCP knows this too. Invading another country, especially one with a strong will to survive and support from the West, might not be as easy as everyone thinks.
Taiwan is no longer interested in reunification with China. Taiwan is happy being a small independent island with its own government, currency, legal system, military, and culture. Taiwan, like most nations, would prefer open and fair trade with China and create business opportunities that benefit both sides. Taiwan wants economic prosperity, not war.
People != Government
At Google, I’ve worked with people around the world. My mentee was Russian. On Meet, we have engineers from US, Canada, India, Taiwan, China, Poland, Belarus, Iran, and other countries. I’ve worked with a Ukrainian engineer who is also a fellow Tesla owner. In our office in Stockholm, we have engineers from all over Western and Eastern Europe. Everyone always got along at work and enjoyed each other’s company as friends.
Clearly there is a lot of tension between Russia and Ukraine, China and Taiwan. What we should remember is that the people and its government are different things. We may disagree with the policies of the Kremlin or the CCP, but we should not extend fault to the country’s entire population or culture.
Many Russians are against the Ukrainian invasion. Similarly, there are many mainland Chinese who are critical of the CCP. The US is no angel. Our citizens are often critical of the actions of our government. But one major difference is that Americans are allowed to and even encouraged to voice our dissent, and elect new leaders. These essential freedoms aren’t true in some countries.
When everything is distilled, we are not all that different. We pretty much all want the same thing: health, stability, good future for our children. When others visit our nation, as proud citizens, we want to be the best hosts. We want to share our food and show others the colors of our culture. We are more alike than different.
Let’s hope one day we can forget wars and just be friends. I hope Ukraine successfully holds off the invasion and maintains its sovereignty. Not only is Ukraine fighting for its own survival, it is fighting for the rest of Europe, for Freedom, for Democracy, and by extension, for Taiwan too.
