Taiwan, the manufacturing hub of the world's advanced semiconductors, is raising global concerns as the aftermath of strait blockades reaches the island. With liquefied natural gas (LNG) supplies cut off due to the closure of the Strait of Hormuz, Taiwan has only 11 days of reserves remaining. Adding to the crisis, if the waters around Taiwan are blocked by China's invasion threats, even the export of finished semiconductor chips could be halted.
According to Bloomberg on Tuesday, not a single LNG carrier from Qatar has arrived at the Yongan Terminal at Kaohsiung Port in southern Taiwan since the Strait of Hormuz was blocked in March.
Taiwan imports approximately 96% of its energy, with LNG accounting for half of that. The semiconductor industry consumes 18% of the electricity generated from these energy sources. Despite Taiwan's economic stature, its fragile power infrastructure has led to blackouts and halted data center construction. Nuclear power plants that have ceased operations cannot be restarted until after 2028 due to public opposition. Mark Montgomery, a senior fellow at the Foundation for Defense of Democracies (FDD), noted that "the power grid has struggled to keep pace with 20 years of aggressive GDP growth."
The crisis is intensifying due to China's invasion threats against Taiwan. China could block the Taiwan Strait between Taiwan and the mainland, or the Bashi Channel between Taiwan and the Philippines. These two straits serve as supply routes for raw materials used in semiconductor chip manufacturing, as well as supply chains for Nvidia and Apple chips. Jennifer Welch, chief geoeconomics analyst at Bloomberg Economics, said, "If China blockades the straits around Taiwan, it will cut off not only energy but also semiconductor raw material supplies and finished chip exports." This concern is also why TSMC, Taiwan's flagship company, is building production facilities in Arizona, Kumamoto in Japan, and Dresden in Germany.
The Taiwanese government has responded by importing LNG from the United States instead of the Middle East. It has secured spot market volumes through July at prices twice as high as long-term contract rates. Taiwan also plans to increase the share of U.S.-sourced LNG to 25% by 2029. Taiwanese companies have signed preliminary agreements for the $44 billion (approximately 64 trillion won) Alaska LNG project as well.
However, some argue that the fundamental solution lies in energy independence. Elena Yi-Ching Ho, co-founder of Research Plus Action, said, "Taiwan should seize this crisis as a strategic opportunity to accelerate the transition to renewable energy."
