Semiconductor Supply Chains Under Siege: Navigating Cross-Strait Geopolitics with Strategic Investments

The Taiwan Strait has become the epicenter of a geopolitical storm, with escalating military posturing and economic interdependencies threatening to upend global semiconductor supply chains. With Taiwan hosting 92% of the world’s advanced chip foundries, including TSMC—the manufacturer of 90% of cutting-edge chips—the region’s stability is critical to the tech sector’s survival. As recent PLA military exercises and U.S.-Japan security alliances underscore the fragility of the status quo, investors must prioritize sector-specific resilience and diversification to safeguard portfolios.

The Geopolitical Crossroads: Tensions and Market Risks

Recent developments underscore the stakes. In April 2025, the PLA’s largest-scale exercises in the Taiwan Strait since 1996 disrupted shipping routes and prompted U.S. military evacuations. Simultaneously, Japan’s invocation of Article 5 of the U.S.-Japan Security Treaty—a first—signaled a shift from passive deterrence to active alliance-building.

The market has already priced in these risks. TSMC’s shares fell 3.1% in April 2025 amid fears of supply chain disruptions, while the iShares MSCI Taiwan ETF (EWT) dropped 2.8%.

Diversification: The New Playbook for Semiconductor Resilience

To mitigate exposure to Taiwan-centric supply chains, investors should focus on companies with geographically diversified manufacturing bases or alternative technology solutions.

1. U.S. Chip Giants with Strategic Expansion
2. Intel (INTC): Its $20 billion Ohio chip plant, supported by CHIPS Act subsidies, positions it to capitalize on U.S. manufacturing localization. Intel’s leadership in mature-node chips (critical for automotive and industrial sectors) adds defensive value.

3. GlobalFoundries (GFS): This pure-play foundry operates plants in the U.S., Germany, and Singapore, reducing reliance on Taiwan. Its foundry-as-a-service model insulates it from geopolitical volatility.

4. Asia-Pacific Diversification Leaders

5. Samsung Electronics (005930.KS): While reliant on Korean facilities, Samsung’s $17 billion Vietnam chip plant and partnerships with U.S. firms like Qualcomm offer a balanced exposure.
6. SMIC (0981.HK): Despite U.S. sanctions, SMIC’s advancements in 28nm technology and its mainland China base make it a low-cost alternative for non-U.S. customers.

Defensive Plays in Semiconductor Equipment and Materials

Even as foundries diversify, the equipment and materials supply chain remains a choke point. Companies with leading-edge technology and global sourcing networks are prime defensive holdings.

• ASML Holding (ASML): The sole supplier of EUV lithography machines for advanced chips, ASML benefits from rising demand for next-gen manufacturing. Its partnerships with U.S., European, and Japanese suppliers reduce single-country risks.
• Applied Materials (AMAT): A leader in deposition and etching tools, Applied Materials’ global R&D network and partnerships with TSMC, Samsung, and Intel position it as an essential enabler of chip production resilience.
• Tokyo Electron (8035.T): Japan’s semiconductor equipment giant dominates critical processes like plasma etching, offering exposure to Asia’s tech ecosystem without direct Taiwan exposure.

Regional Infrastructure: The Safe Harbor for Capital

Investors should also consider infrastructure stocks in geopolitically stable regions that support supply chain diversification.

• ASEAN Infrastructure Plays:
• Sembcorp Industries (S58.SI): A Singapore-based utility and infrastructure developer, Sembcorp is expanding data centers and green energy projects in Southeast Asia—critical for tech supply chain redundancy.
• Thai Diamond (TPIPP): Thailand’s leading infrastructure firm, it benefits from ASEAN’s push to modernize logistics networks, reducing reliance on Taiwan’s ports.

Conclusion: Act Now to Secure Your Portfolio

Cross-strait tensions are no longer a distant risk—they are a present-day reality reshaping global markets. Investors must act decisively to:

1. Allocate to Diversified Foundries and U.S./European Chip Makers like Intel and GlobalFoundries.
2. Buy Equipment Leaders such as ASML and Applied Materials, which underpin all chip production.
3. Hedge with Regional Infrastructure Stocks insulated from direct conflict.

The stakes are clear: with Taiwan’s chokehold on advanced semiconductors, failure to diversify today could mean catastrophic portfolio losses tomorrow. This is not a time for观望—it’s a call to action.

Data as of May 16, 2025. Past performance does not guarantee future results.