An automotive engineer welds components at Nelson Mandela University in Gqeberha, South Africa. The move by Taiwan to restrict chip exports to the country could result in job losses in South Africa’s auto industry.Shafiek Tasiem/Reuters
After years of diplomatic setbacks on the world stage, Taiwan has signalled that it is willing to use its dominance of the semiconductor-chip industry as a pressure tactic against countries that challenge its geopolitical interests.
Taipei sent shock waves through South Africa last week when it announced restrictions on its chip exports to the country, triggering fears of massive job losses in South African factories.
Taiwan produces the majority of the world’s most advanced chips, which are required in automotive manufacturing and other sectors. Any restriction on chips could damage South Africa’s auto sector and could even affect supplies of cellphones and other consumer goods if Taiwan required companies such as Apple to restrict their exports of chip-equipped products to South Africa.
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The Asian island announced the export curbs after accusing South Africa of undermining its security by demanding that it relocate its unofficial diplomatic office from the capital, Pretoria, to the main commercial centre, Johannesburg, where it would become solely a trade office.
Taiwan’s Ministry of Economic Affairs said the attempted relocation “posed dangers to the protection of national security and public safety” and could cause “adverse effects” on Taiwan’s economic and trade activities.
It announced that advance approval would be required for any South African imports in 47 categories of products from Taiwan, covering a wide range of chips.
Chips made in Taiwan are used in automotive manufacturing and other sectors.I-HWA CHENG/AFP/Getty Images
Taiwan’s Foreign Ministry urged Pretoria to “recognize Taiwan’s interactions with other countries, stop spreading false information that may mislead the international community, return to a position of rationality and reality, and engage in negotiations with Taiwan on an equal and respectful footing.”
The export restrictions were suspended later in the week, after South Africa agreed to discuss the relocation of the Taiwan office, but they were widely seen as a sign that Taiwan was beginning to flex its trade muscles.
“The threat raises questions about whether such curbs should now be considered part of Taiwan’s armory in managing diplomatic ties,” economists at Capital Economics said in a research note.
The potential Taiwanese restrictions sparked alarm in South Africa. The move would “decimate South Africa’s manufacturing industry, compromise our industrial competitiveness, and shed tens of thousands of jobs in an already strained international trade environment,” Ryan Smith, an MP from the Democratic Alliance, a member of South Africa’s governing coalition, said in a statement last week.
South African President Cyril Ramaphosa, speaking before Taiwan suspended the restrictions, told an audience in New York that the export curbs “obviously will impact on us.” He said the relocation of the Taiwan office was “nothing terribly wrong,” but would be discussed with Taiwan.
Like most other countries, South Africa accepts Beijing as the sole representative of China. Only 11 countries give diplomatic recognition to Taiwan today, and this number has steadily diminished since the early 1970s when dozens of countries recognized it.
With its diplomatic influence declining, Taiwan opted to invoke its economic power against South Africa, wielding its most important export and its geopolitical ace in the hole.
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For decades, China and Taiwan have tussled for diplomatic recognition and influence around the world, with Beijing increasingly picking off Taipei’s official partners even as Western support for the democratic island has grown.
This competition has involved both carrots and sticks from Beijing. It provided US$150-million in aid to El Salvador after it broke ties with Taiwan, and it slapped trade sanctions on Lithuania in protest of Vilnius getting closer to Taipei.
Until now, Taiwan has typically stuck to carrots, spending generously from its comparatively minuscule aid budget. But it may have decided that it could use tougher tactics against South Africa because it has close ties with Beijing and already suffers frequent criticism from the Donald Trump administration in Washington.
Guo Jiakun, a spokesperson for China’s Foreign Ministry, praised South Africa for “resolutely moving forward” on the relocation of the Taiwanese office in Pretoria.
Speaking at a press conference in Beijing last week, Mr. Guo said the threatened export curbs would backfire because China’s exports of chips to South Africa were three times higher than Taiwan’s exports last year. He accused Taiwan of “weaponizing chips” in a deliberate move to “destabilize global chip industrial and supply chains.”