American President Joe Biden has publicly promised three times in the past few months that the United States would defend Taiwan in the event of a Chinese attack.

White House officials backtracked three times after that, blurring Biden's clear position.

This has not helped confidence in Taiwan's prospects.

The geopolitics are overshadowing the economic development of the democratic island that Beijing claims as part of China.

Patrick Welter

Correspondent for business and politics in Japan based in Tokyo.

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On Tuesday, key stock market indices in Taiwan and Asia fell on the occasion of the visit to Taiwan by Nancy Pelosi, Speaker of the US House of Representatives.

Investors on the stock exchanges anticipated the risk that China, in response to Pelosi's visit, could punish Taiwan militarily with threatened excursions to Taiwanese air space or with economic sanctions.

The Taiex in Taipei fell 1.4 percent along with the Nikkei Tokyo, the Hang Seng index in Hong Kong fell 2.4 percent and the Shanghai Composite fell 2.3 percent.

Pelosi is the highest-ranking American politician to visit Taiwan in 25 years.

According to local media reports, Pelosi is scheduled to meet with Taiwanese President Tsai Ing-wen this Wednesday.

The stock market reaction highlights the danger that the American's demonstrative commitment to Taiwan democracy will cause further damage to the inflation-plagued global economy.

Or are the chips a security risk?

The pivotal point in the economic triangle between America, China and Taiwan is the semiconductor industry.

The island is as large as Baden-Württemberg in terms of area, as large in population as Baden-Württemberg plus Bavaria and slightly larger in terms of economic output than Bavaria.

However, Taiwan is a global leader in the custom manufacture of computer chips, which contributes around 15 percent to gross domestic product and accounts for 40 percent of exports.

After decades of state-subsidized construction, Taiwan has attained a specialized position at the forefront of the chip industry, making it a key node in the supply chains for computers, cell phones, automobiles and the defense industry.

This applies to the West as well as to China.

If semiconductors left Taiwan, the United States would face a recession, US Secretary of Commerce Gina Raimondo warned in July as she campaigned for more than $70 billion in subsidies and tax breaks to expand domestic chip production.

Congress has now approved the subsidies.

Taiwan relied on manufacturing in the "foundry" business, not on the design of the microchips.

The island's chip manufacturers produce under contract, for example for Apple or Broadcom.

The island has thus acquired a dense network of specialized engineers and suppliers that, according to experts, China will not be able to imitate for many years, even with investments worth billions.

According to an estimate by the market research company Trendforce, Taiwan's chip manufacturers have a global market share of 64 percent in semiconductor contract manufacturing, ahead of South Korea with 18 percent and China with 7 percent.

Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest semiconductor manufacturer, alone has a market share of 53 percent.

TMSC has a market share of more than 90 percent for the most advanced logic chips, such as those found in Apple's iPhones.

Technically, only Samsung Electronic from South Korea can keep up with the Taiwanese market leader.

TSMC's stock fell 2.4 percent on Tuesday, more than the Taiex index.

The geopolitical value of the dominant semiconductor economy is controversial for Taiwan.

Two approaches compete.

Traditionally, the chip economy has been seen as the "magic mountain that protects the nation."

According to this thesis, the economic dependence of America and China on chips from Taiwan ensures that there will be no war over the island.

Some military experts, such as the Americans Jared M. McKinney and Peter Harris, have developed this thesis into an unusual defense strategy for the island.

Taiwan would then threaten to destroy TSMC's manufacturing facilities in the event of a Chinese attack, causing severe damage to China's electronics industry for many years to come.

Another opinion, however, increasingly sees a security risk in Taiwan's dominant economic position in the semiconductor industry.

With its economic demarcation from China, the United States is increasing Beijing's risk of being cut off from purchasing semiconductors from Taiwan.

That could increase the risk of a Chinese attack on Taiwan, argued the American political scientist Dale Copeland in an op-ed for the business newspaper Nikkei.

Copeland sees a parallel to the American oil embargo that prompted Japan to go to war over raw materials in Southeast Asia in 1941.

The TSMC currently setting up factories in the United States and Japan only adds to China's concern in this perspective, Copeland said.