Taiwan considered halting microchip exports after SA downgraded its consular presence BL Premium

13 October 2025 – 05:00

by Ayabonga Cawe

“Weaponised” interdependence has now become part of our lexicon. In part, we have the US academic duo Henry Farrell and Abraham Newman to thank for that. Their 2019 paper unpacking the concept highlighted the immediacy of the challenge, rather than it being a distant or looming possibility.

In our case, SA (while accounting for less than 0.5% of global trade) is concerningly vulnerable to the weaponisation of these asymmetries in power within global supply chains, precisely because of our location and function within global production networks as a producer of a diverse set of consumer, industrial and military goods.

In this sense, the interconnectedness arising from globalisation is both a gift and a curse. As nations increasingly weaponise networks to gather information or choke off economic and information flows, they also do so to discover and exploit vulnerabilities to compel policy change and as a deterrent to antagonists.

The decision by the Taiwanese ministry of economic affairs in late September to consider placing the export of microchips (integrated circuits, processors, memory units and so on) to SA under a “licensing” regime is an example of this. In this case, the unwanted action being penalised is the decision by Pretoria to downgrade the consular presence of Taiwan in SA and relocate its liaison office. In response, Taipei weaponised its near-total dominance in advanced chips to cut off supplies to SA of input material crucial to technology supply chains.

While Taiwan reversed its decision a few days later as talks unfolded between the two nations, it is a signal that we are in new terrain. As economic sanctions expert Pei-Yu Wei of Dartmouth College noted in a recent article, this episode “marks the first time that Taiwan has actively and unilaterally used its position in the chip supply chain to engage in economic coercion”.

Indeed, while we might be a small open-market economy importing much lower volumes of these microchips than, say, India (a top electronics assembler), these goods are at the centre of any ambition to broaden the complexity of our industrial base, as they are a crucial ingredient across a wide range of domains. They are used in anything from home appliances, advanced gaming processors and elementary applications in electronics to data centres and advanced automation, aerospace, defence and surveillance systems. Furthermore, they are primarily used by multinational firms manufacturing in SA that are lead firms within product markets, introducing a few complications within these supply chains.

The first, perhaps because the locus of research and design activities (as drivers of the choice of componentry within a product) for television sets, smart washing machines and advanced gas turbines is concentrated in the home markets of these firms and other lead destinations. This makes the prospect of diversification away from Taiwanese chips towards cheaper and relatively less advanced substitutes intractably difficult.

Second, export controls might penalise and attract further scrutiny of existing transnational sourcing patterns by multinationals, creating a further disincentive to assemble in SA, as many of the microchips we do import from Taiwan are rerouted through other destinations before they come here. While Taiwanese chips constitute about a 10th of all electronic integrated circuits imported into SA, only a fifth of this proportion over the past two years has come directly from Taiwan, with most being routed via the US and Germany primarily.

In instances where Taiwanese exporters will be expected to furnish for export control purposes the final destination of the chips, this might introduce further input supply delays at great cost to electronics manufacturers and distributors and other providers of security applications in SA.

In this way, Taipei has signalled its intent to use instruments of economic coercion as leverage in diplomatic disputes. One suspects it may not be the last time it does so.

• Cawe is Chief Commissioner at the International Trade Administration. He writes in his personal capacity.