US playing with fire, to enter great depression if China takes Taiwan

By Al Mayadeen English
Source: Agencies
17 Nov 2022 12:26
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Founder of Citadel and American billionaire Ken Griffin says the United States will enter an immediate great depression if China cuts off the supply of semiconductors.

Founder and CEO of Citadel Kenneth Griffin

Citadel founder and American billionaire Ken Griffin said on Tuesday that the United States is "playing with fire" over the Taiwan issue and that the country would instantly plunge into a "great depression" if the supply of semiconductors is cut from the island.

"The United States has no ability to produce anywhere near the number of semiconductors it needs to run its economy. We are utterly and totally dependent upon the Taiwanese for modern semiconductors in America," Griffin said during an interview for Bloomberg.

The founder of the American multinational hedge fund stressed that the US economy can't withstand the impact if Beijing "invades" Taiwan and prevented access to the island's semiconductor production.

"We are playing with fire here. Let's be very clear. If we lose access to Taiwanese semiconductors, the hit to US GDP is probably on an order of magnitude of 5% to 10%. It's an immediate great depression," Griffin added.

The situation around Taiwan escalated following US House Speaker Nancy Pelosi's visit to Taipei. China considers Taiwan part of its territory and opposes any direct official foreign contact with the island.

In a statement following a meeting between the US Secretary of State, Antony Blinken, and the Chinese Foreign Minister, Wang Yi, the Chinese Foreign Ministry pointed out that the US was sending "very wrong, dangerous signals" on Taiwan.

US officials have previously warned that the situation concerning Taiwan, the sole source of advanced semiconductor microchips, jeopardizes US national security.

The CHIPS and Science Act 2022, passed by the US government recently, which aims to subsidize semiconductor production and research in a bid to boost incentives to make the US more competitive with China's science and technology efforts, is not sufficient to compensate for Taiwan's production, not even close.

This legislation will allow $200 billion over a decade to boost technology research that will compete with Beijing - however, Congress will need to pass separate appropriations legislation to fund those investments.

China accused the bill of threatening global supply chains and hampering international trade, stating that it not only holds the purpose to compete against China's technological innovation and market but also a more troublesome role, as Beijing announced opposing the bill.

Warren Buffett's Berkshire Hathaway still perceives the semiconductor industry in Taiwan as a profitable investment, arguing that China might eventually not "invade" the island.

Berkshire Hathaway announced earlier this week that it has invested a few billion dollars in Taiwan's TSMC, the world's leading semiconductor manufacturer, which caused the chipmaker's stock value to jump.

The new investment, however, holds great risk for the company as its largest investment is currently in Apply, which also provides a large amount of revenue for TSMC, if Griffin's view of a Chinese clash with Taiwan actually occurs.

Earlier in October, the US Secretary of State Antony Blinken stated that if semiconductor production in Taiwan is disrupted, the world would be thrown into a global economic crisis.

It's noteworthy that according to analysts earlier this year, a shortage of microchips in manufacturing processes in the US cost the US economy $240 billion last year, with electronics companies bearing the brunt of the impact.

According to CBS, disruptions were caused by the closure of key chip production sites in Asia owing to the epidemic.

The microchip scarcity has also hampered automobile production. Instead of driving immediately to the showroom, Ford vehicles were transported to parking lots from the assembly line where they waited for chips.

As a result, Ford lost $210 billion. The scarcity is predicted to worsen in the near future, but domestic chip manufacturing is expected to increase, with intel announcing the development of a chip facility in the state of Ohio.

The US crackdown on the sale of technology to China has already begun to have an impact, with the US chip designer Nvidia disclosing that it had been told by US officials to stop exporting two top computing chips for artificial intelligence work to China.