Chapter 5: The Invasion Scenarios

What Happens If China Attacks Taiwan—Four Scenarios From Capture to Destruction, The Cascading Consequences for Apple, NVIDIA, the Global Economy, and You

The $1 Trillion Chokepoint • Part II: The Geopolitical Nightmare

The Question Everyone Asks

After understanding TSMC's technological dominance (Chapters 1-3) and Taiwan's geographic vulnerability (Chapter 4), one question dominates every conversation:

What actually happens if China invades Taiwan?

Not in abstract geopolitical terms. Not in diplomatic hypotheticals. But in concrete, specific outcomes:

• What happens to TSMC's fabs?
• What happens to iPhone production?
• What happens to NVIDIA's AI chips?
• What happens to your ability to buy a new computer?
• What happens to the global economy?

This Chapter Examines Four Scenarios:

1. Scenario 1: China captures TSMC fabs intact (gains the treasure)
2. Scenario 2: Taiwan/U.S. destroys fabs before capture (denies the treasure)
3. Scenario 3: Blockade slowly strangles Taiwan (coercion without invasion)
4. Scenario 4: Cyberattack cripples production (digital warfare)

Each scenario leads to different immediate outcomes but similar long-term catastrophe: the disruption or loss of the world's most critical manufacturing capacity.

These aren't idle speculation. They're scenarios actively war-gamed by:

• Pentagon planners preparing for potential conflict
• CIA analysts assessing likelihood and consequences
• Corporate risk managers at Apple, NVIDIA, AMD, Qualcomm
• Economic policymakers modeling global impact
• Military strategists in U.S., China, Taiwan, Japan

The goal isn't to predict what will happen. It's to understand what could happen—and why even low-probability scenarios demand serious preparation when the consequences are this severe.

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Part I: Scenario 1—China Captures TSMC Intact

The Optimistic Scenario (For China)

In this scenario, China successfully invades Taiwan and captures TSMC's fabs with minimal damage. China gains control of the world's most advanced semiconductor manufacturing.

How This Scenario Unfolds:

Phase 1: The Assault (Week 1)

• Massive missile barrage targeting Taiwan's military installations
• Cyber attacks disrupt Taiwan's command and control
• Amphibious landing at multiple beaches
• Airborne assault to secure airfields
• Critical: China deliberately avoids striking Hsinchu and Tainan Science Parks

Phase 2: The Conquest (Weeks 2-4)

• Chinese forces advance toward major cities
• Urban warfare in Taipei, Kaohsiung
• Taiwan's military resists but eventually overwhelmed
• Special forces race to secure TSMC facilities before they can be destroyed
• Taiwan government faces decision: destroy TSMC or let it be captured

Phase 3: The Capture (Week 4-8)

• Chinese forces secure Hsinchu and Tainan Science Parks
• TSMC fabs largely intact (some damage from fighting nearby)
• Chinese military establishes perimeter, prevents sabotage
• Taiwan government surrenders or evacuates
• China declares victory, Taiwan "reunified"

Immediate Consequences (Months 1-6)

For TSMC's Operations:

• Production halts completely during fighting and immediate aftermath
• Key personnel flee or refuse to work: Many TSMC engineers evacuate to family abroad, some join resistance
• Supply chains disrupted: International suppliers (ASML, Applied Materials, etc.) cease shipments
• Equipment maintenance impossible: Without spare parts and technical support, fabs begin degrading
• Skilled workforce scattered: Can't manufacture advanced chips without experienced engineers

For Global Technology:

• Apple: iPhone/Mac production stops within 2-3 months (exhausts chip inventory)
• NVIDIA: GPU production halts, AI chip supply dries up
• AMD: CPU/GPU manufacturing stops
• Qualcomm: Smartphone chip supply ends
• Data centers: Can't expand capacity, AI development stalls
• Automotive: Advanced driver assistance systems can't be produced

For Global Economy:

• Tech stock collapse: Apple, NVIDIA, AMD lose hundreds of billions in market cap
• Supply chain panic: Companies scramble for alternative sources (none exist at scale)
• Consumer electronics shortages: Smartphones, laptops, gaming consoles unavailable
• Economic recession: Tech sector disruption cascades across economy

Can China Actually Operate TSMC?

Even if China captures fabs intact, operating them is extraordinarily difficult:

The Operational Challenges:

1. Workforce Problem

• TSMC has 73,000 employees with specialized expertise
• Many will flee, refuse to work, or actively sabotage
• Can't force engineers to operate complex processes they could easily sabotage
• Training replacements takes years—can't learn in weeks

2. Supply Chain Problem

• 700+ international suppliers won't ship to Chinese-controlled Taiwan
• ASML won't provide EUV machines or support (U.S./Dutch export controls)
• Chemicals, gases, materials—all require continuous supply
• Without supplies, fabs degrade within weeks/months

3. Technical Knowledge Problem

• Advanced manufacturing requires tacit knowledge not in any manual
• Process recipes, tool settings, troubleshooting—all expertise-dependent
• Even with equipment intact, can't manufacture without know-how
• Chinese engineers could attempt to learn, but would take years

4. International Sanctions Problem

• U.S./Europe/Japan would immediately sanction Chinese-controlled TSMC
• Prohibit any technology transfer or support
• Freeze TSMC's international assets
• Ban TSMC chip exports

Long-Term Outcomes (Year 1-5)

Best Case for China:

• After 1-2 years, manages to restart limited production at older nodes (28nm, 14nm)
• Leading-edge fabs (5nm, 3nm) remain non-operational (too complex without international support)
• Yields low, quality inconsistent compared to pre-invasion TSMC
• Production exclusively for Chinese domestic use (international sanctions)
• Advances China's semiconductor independence but doesn't match pre-war TSMC

Most Likely Case:

• TSMC's advanced capabilities permanently lost
• Fabs eventually degraded beyond repair without maintenance and supplies
• China gains facilities but can't operate them effectively
• Technology treasure turns out to be worthless without ecosystem

Worst Case (For China):

• Taiwan/U.S. cyber attack renders equipment unusable before capture
• Key equipment destroyed or sabotaged by fleeing engineers
• China gains physical fabs but they're just expensive buildings
• Paid enormous cost (casualties, sanctions, international isolation) for nothing

Global Impact Assessment

Economic Damage (Scenario 1):

• Immediate (Year 1): $1-2 trillion in direct losses
• Technology sector: $500B-$1T in market cap destruction
• Consumer electronics: Severe shortages, price spikes
• AI development: Stalled for 2-5 years until alternatives scale
• Automotive: Production disrupted, advanced features unavailable
• Global GDP impact: 2-3% contraction (similar to 2008 financial crisis)

Strategic Impact:

• China gains: Taiwan territory, potential access to TSMC technology (limited)
• U.S. loses: Key ally, chip access, strategic position in Asia
• Global loses: Most advanced chip production for years

Even if China "wins" militarily, the prize might be worthless—TSMC without its ecosystem, workforce, and international support is just expensive buildings.

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Part II: Scenario 2—Scorched Earth (Taiwan Destroys TSMC)

The Denial Strategy

In this scenario, as Chinese invasion becomes imminent, Taiwan and/or the United States execute a plan to destroy TSMC's fabs to prevent China from capturing them.

This is the "scorched earth" option: If we can't have it, nobody can.

How This Scenario Unfolds:

Phase 1: Intelligence Warning (Days Before)

• U.S. satellites detect Chinese military buildup across the strait
• Taiwan raises alert status, mobilizes reserves
• TSMC evacuates non-essential personnel
• Taiwan government prepares demolition plan

Phase 2: The Decision (Hours Before Invasion)

• Chinese missiles begin hitting targets across Taiwan
• Taiwan's president faces the decision: destroy TSMC or let it be captured
• Arguments for destruction: Deny China the prize, maintain Western support
• Arguments against: Destroys Taiwan's greatest asset, eliminates silicon shield
• Decision made: Destroy the fabs

Phase 3: The Destruction (Hour 0)

• Precision strikes from Taiwan's own military destroy key equipment
• Critical EUV lithography machines rendered inoperable
• Clean rooms compromised (contamination makes them unusable)
• Power systems destroyed, water purification systems wrecked
• Chemical storage facilities neutralized
• Within hours, TSMC's advanced fabs are permanently disabled

Phase 4: The Aftermath (Days-Weeks)

• China invades as planned
• Captures Taiwan but finds TSMC fabs destroyed
• Paid full cost of invasion but gained no technology treasure
• World loses TSMC capacity regardless of who controls Taiwan

The Impossible Choice

Taiwan's decision to destroy TSMC is agonizing because there's no good option:

Arguments For Destroying TSMC:

Strategic:

• Denies China the primary strategic objective
• Makes invasion "pointless" from technology perspective
• Maintains U.S./allied support (they won't tolerate China controlling TSMC)
• Forces world to support Taiwan resistance (can't get chips from China-controlled Taiwan)

Deterrence:

• If China knows Taiwan will destroy TSMC, might deter invasion
• Removes the "capture intact" scenario as viable option
• Forces China to calculate: is invasion worth it if TSMC destroyed anyway?

Arguments Against Destroying TSMC:

Economic:

• Destroys Taiwan's greatest economic asset
• Eliminates silicon shield protection permanently
• Removes Taiwan's leverage with international community
• Makes post-war recovery much harder (no TSMC to rebuild around)

Practical:

• Once destroyed, takes 5-10 years minimum to rebuild equivalent capacity
• Global economy suffers regardless of who wins militarily
• Might not actually deter China (if nationalism outweighs economics)
• Irreversible decision with no second chances

Can Taiwan Actually Destroy TSMC Quickly Enough?

The practical challenge: TSMC's fabs are enormous, heavily reinforced facilities. Can Taiwan actually destroy them before Chinese forces arrive?

Demolition Requirements:

What Needs to Be Destroyed:

• EUV lithography machines: Precision strikes or internal sabotage
• Clean rooms: Breach containment, introduce contamination
• Chemical supply systems: Disable or contaminate
• Ultra-pure water systems: Destroy purification infrastructure
• Power distribution: Wreck electrical systems
• HVAC systems: Compromise climate control

Methods Available:

• Precision missile strikes: Taiwan's military could strike own facilities
• Internal sabotage: TSMC personnel deliberately damage critical equipment
• Cyber attack: U.S./Taiwan cyber capabilities render control systems inoperable
• Chemical contamination: Introduce contaminants that ruin clean room integrity

Timeline Challenge:

• Taiwan would have hours to days once invasion begins
• Chinese special forces would prioritize securing TSMC facilities
• Race between Taiwan's destruction and China's capture
• Irreversible decision must be made under extreme time pressure

Global Impact: Everyone Loses

In Scenario 2, nobody wins. Taiwan loses its crown jewel, China gains territory but no technology, and the world loses TSMC regardless of military outcome.

Economic Impact (Scenario 2):

Immediate (Months 1-6):

• Same as Scenario 1: All TSMC customers lose chip supply
• Apple, NVIDIA, AMD, Qualcomm: Production halts within months
• Tech sector collapse: $1T+ in market cap destruction
• Consumer electronics: Severe shortages, massive price increases
• AI development: Completely stalled

Medium-Term (Year 1-3):

• No quick recovery possible: TSMC destroyed, can't restart production
• Alternative capacity insufficient: Samsung can't absorb TSMC's entire customer base
• Intel's fabs not advanced enough for cutting-edge chips
• Persistent shortages for years until alternatives scale

Long-Term (Years 3-10):

• Massive investment in building alternative capacity (U.S., Europe, Japan)
• 5-10 years before equivalent capacity online
• Higher costs permanently: Lost economies of scale from TSMC concentration
• Innovation slowdown: Semiconductor progress delayed by years

Estimated total economic damage: $3-5 trillion over 10 years, comparable to or exceeding COVID-19 pandemic impact

The Deterrence Question

Does Taiwan's ability and willingness to destroy TSMC actually deter China from invading?

Arguments It Deters:

• Removes primary economic benefit of invasion
• China gains territory but loses technology objective
• Makes invasion economically irrational
• Forces China to calculate whether Taiwan land alone is worth the cost

Arguments It Doesn't Deter:

• Nationalism and political legitimacy might outweigh economics
• Xi Jinping's legacy tied to reunification regardless of TSMC
• China might calculate they'll eventually rebuild semiconductor industry anyway
• Historical grievances and sovereignty claims transcend economic calculation

The Uncomfortable Reality:

If China invades despite knowing TSMC will be destroyed, it reveals that economic rationality isn't driving their decision—and that makes the situation even more dangerous.

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Part III: Scenario 3—The Slow Strangulation (Blockade)

The Alternative to Invasion

China doesn't have to invade to cripple Taiwan. A blockade—cutting off Taiwan from the outside world—could force surrender without the risks of amphibious assault.

This scenario is actually more plausible than full invasion because it's less risky for China and harder for the U.S. to counter.

How Blockade Scenario Unfolds:

Phase 1: Gray Zone Escalation (Months 1-3)

• China increases military exercises around Taiwan (already happening)
• Coast Guard and maritime militia harass shipping
• "Routine inspections" of vessels heading to Taiwan ports
• Gradually expanding exclusion zones
• Not yet formal blockade, but shipping becomes difficult/expensive

Phase 2: Quasi-Blockade (Months 3-6)

• China declares "special security zones" around Taiwan
• Requires vessels to request permission to enter Taiwan waters
• Lengthy "inspections" delay shipping
• Insurance rates for Taiwan shipping skyrocket
• Many shipping companies avoid Taiwan rather than risk delays
• Air routes increasingly restricted through Chinese pressure

Phase 3: Full Blockade (Month 6+)

• China announces "training exercises" that effectively block all Taiwan ports
• No ships allowed in or out without Chinese approval
• Air traffic banned ("for safety during exercises")
• Not called "blockade" (which would be act of war) but has same effect
• Taiwan completely isolated

Phase 4: Economic Collapse (Months 6-12)

• Taiwan runs out of fuel, food, medical supplies
• TSMC operations degrade (can't get materials, equipment, spare parts)
• Economic activity collapses
• Political pressure builds on Taiwan government to negotiate
• Eventually forced to accept Chinese terms

Why Blockade Is Particularly Dangerous

Blockade scenario is scarier than invasion precisely because it's more plausible and harder to counter:

Advantages of Blockade (From China's Perspective):

Lower Military Risk:

• No amphibious assault (hardest military operation)
• No urban warfare with high casualties
• Lower risk of military failure
• Can maintain blockade indefinitely with navy and air force

Harder to Counter:

• U.S. faces dilemma: start shooting to break blockade? That's escalation
• No clear "invasion" to respond to—just "training exercises"
• International community divided on whether/how to respond
• Gradual nature makes mobilizing response difficult

Achieves Same Goal:

• Forces Taiwan to surrender without invasion
• Less physical destruction (TSMC fabs intact)
• Lower international outcry than invasion
• Can be presented as "peaceful" resolution

Impact on TSMC Operations

Blockade wouldn't immediately destroy TSMC, but it would gradually degrade operations until production becomes impossible:

Week 1-2: Initial Impact

• Existing inventory allows continued production
• Supply chain managers scramble for alternative routes
• TSMC activates contingency plans
• Operations continue but anxiety rising

Week 3-6: Degradation Begins

• Critical materials running low (chemicals, gases, photoresists)
• Equipment maintenance becoming difficult (spare parts blocked)
• Some production lines slow or halt
• Engineers begin evacuating families

Week 7-12: Production Collapse

• Most advanced processes shut down (require continuous material supply)
• Older processes continue at reduced capacity
• Yields declining as equipment degrades without maintenance
• Workforce attrition as key personnel leave

Month 4+: Complete Shutdown

• All production halted
• Fabs physically intact but operationally dead
• Equipment degrading without proper maintenance
• Clean rooms losing integrity
• Even if blockade lifted, takes months to restart

The U.S. Dilemma