Why tensions between China and Taiwan are on the rise

In May, President Joe Biden issued a stark warning to China: The U.S. would come to Taiwan’s defense militarily if China were to invade.

“That’s the commitment we made,” Biden said in response to a question over the U.S.’ intention to protect Taiwan. “We agree with the ‘One China’ policy. We signed on to it.”

Although the White House quickly affirmed the president’s comments did not reflect a policy shift, his remarks came at a time of heightened concern over China’s interest in invading Taiwan after Russia’s invasion of Ukraine.

Biden’s warning contrasted with the U.S.’ long-standing position of “strategic ambiguity” when it comes to Taiwan. That policy makes it unclear whether the U.S. would come to Taiwan’s defense if China were to invade, the Brookings Institution’s Michael O’Hanlon told CNBC in an interview.

Any potential action could have repercussions on the global supply chain. Taiwan has positioned itself as the go-to supplier of the semiconductors found in thousands of electronics, from the iPhone to crucial military equipment. But the global reliance on Taiwan for the essential chips has come under increased scrutiny amid a global shortage.

Taiwan accounts for 64% of the total chip foundry market, according to data from TrendForce. Taiwan Semiconductor Manufacturing Company, or TSMC, accounted for 53% of total foundry revenue in 2021, according to TrendForce.

“I think for older generations, they may remember a Taiwan that produced cheap toys,” said Rupert Hammond-Chambers, president of the US-Taiwan Business Council, in an interview with CNBC. “That, however, has really shifted.”

Watch the video above to find out more about why tensions between China and Taiwan are on the rise, the importance Taiwan plays in the global supply chain, and what experts think could come of China’s increased aggression against its neighboring island.