Disruption to Taiwan microchip supply threatens a ‘major crisis’

US House Speaker Nancy Pelosi Taiwan - I-Hwa Cheng/Bloomberg
US House Speaker Nancy Pelosi Taiwan - I-Hwa Cheng/Bloomberg
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Rising tensions between the US and China over Taiwan threaten to trigger significant shortages of electronics such as mobile phones, one of the world’s largest chip companies has warned.

Intel’s Europe chief Frans Scheper said there would be a “huge impact” and a “major crisis” for the industry if Taiwan’s chipmaking exports are cut off by Beijing.

Fears that supplies from the chipmaking powerhouse could be disrupted have mounted in recent days after tensions surged in the region, following a visit by US House Speaker Nancy Pelosi to Taiwan.

Mr Scheper told The Telegraph: “If you think about mobile phones, 80-90pc of chips are coming from Asia, from that specific area.

“For certain applications it would have a huge impact. Maybe for others a little bit less, but there are not always alternative sources available.”

Severe global chip shortages in the wake of the pandemic have already hit production of cars and game consoles but disruption in Taiwan’s trade would rock the electronics industry. Taiwan dominates the production of chips that are vital to items like smartphones and tablets.

Mr Scheper's comments come as Intel ramps up production to the US and Europe. The American tech giant is attempting to diversify its chip manufacturing and is planning to invest as much as €80bn (£67bn) in European factories over the next decade.

“We are making major investments in Europe and in North America to get more balance,” Mr Scheper said.

But investment will take years to pay off and Mr Scheper said: “If there is a short term crisis, there's not much you can do in that sense, so that would have a major impact.”

On Friday, Beijing suspended cooperation with the US on a range of issues, including the climate and military, after the trip by Ms Pelosi. She is the most senior US politician to visit Taiwan in 25 years.

The Chinese army conducted military exercises close to the island in response to the trip and Taiwan has put its own army on alert. Beijing claims the island is a Chinese province despite the fact it is governed independently.

Experts have warned that a blockade of Taiwan is a possibility.

Mark Williams, chief Asia economist at Capital Economics, said: “Even if most trade did continue, the global economic disruption would still be huge.

“The prospect that this supply could be disrupted or severed in the near future would trigger panic buying and stockpiling.”