Investment experts on semiconductor: Even if China goes to war, it won't be able to obtain TSMC; Japan, the US, and South Korea have already established a semiconductor defense line.

Former Fidelity fund manager and current Chief Investment Officer of the hedge fund Atreides Management, Gavin Baker, stated in an interview on 10/23 that even if a conflict erupts in the Taiwan Strait, it is impossible for China to seize TSMC facilities and engineers. This is because key talent will be swiftly evacuated to allied countries such as Japan, South Korea, Israel, and the United States, and will be safely transferred under the protection of the U.S. military.

He believes that such a layout actually makes the situation more stable, because even if China invades, it will not be able to acquire technology or personnel. At the same time, he emphasizes that TSMC remains the core of the global chip industry, leading Intel by about 18 to 24 months, while the United States is creating an “ally version of the sovereign supply chain” through policies and investments. In his view, chips have long surpassed the commercial realm and have become the strategic core that influences the security of the Taiwan Strait and the global order.

Who is Gavin Baker and why is he a semiconductor authority?

Before founding the hedge fund AT Trades in 2019, Baker worked at Fidelity Investments, managing technology and consumer funds with a scale of several billion dollars. During his time at Fidelity, he became known for early investments in growth stocks such as NVIDIA, Tesla, Amazon, Meta, and Broadcom, and was thus referred to as one of the fund managers on Wall Street who “understood the investment logic of AI and GPU early on.”

Baker is often invited to participate in events such as CNBC, Bloomberg investment forums, and various AI seminars to discuss chip and AI investment trends. He is regarded as an “investor whom even tech company CEOs would listen to,” having been invited multiple times to closed-door seminars alongside industry investors like Bill Gurley and Elon Musk. If I had to describe his role in the industry in one sentence, it would be:

An investor who can talk to engineers about chip manufacturing processes and discuss ROI with Wall Street.

TSMC is ahead of Intel by about 18 to 24 months.

Baker believes that TSMC is currently ahead of Intel and Samsung by about 18-24 months, and this lead is not just due to the gap in equipment or technology, but comes from the accumulation of “process recipes.”

He used baking as a metaphor, pointing out that everyone uses the same ingredients and tools, but the real key is who can create a successful recipe first, as the experiences of the previous generation will allow the next generation to break through faster. Baker also reminded that TSMC's lead in history is not long, and it has only been about 6 years since it truly surpassed Intel.

The surge in order-taking ignores geopolitical risks, and technology has become the key to national defense.

Regarding TSMC's layout in the United States, Baker pointed out that as soon as TSMC's Arizona factory started operations, it was fully booked with orders. Even after price increases, customers are still eager to place orders, and demand remains strong. He believes that due to political and supply chain security factors, the market is willing to pay nearly double the premium for wafers manufactured in the United States.

On the other hand, it is widely believed within Taiwan's political circles that the most advanced processes should remain on the island to maintain geopolitical strategic security. Baker referred to this approach as an “insurance mechanism,” ensuring that the United States has a clear motivation when defending Taiwan.

China's military action cannot seize TSMC, while the US, Japan, and South Korea are building an allied supply chain.

Baker firmly stated that even if a conflict breaks out in the Taiwan Strait, China cannot seize TSMC's factories and engineers. He mentioned that once a crisis occurs, these key talents will be evacuated immediately and distributed to places such as Japan, South Korea, Israel, Arizona, Oregon, and Texas, escorted by U.S. military aircraft. Baker believes that this response system and the distribution of allies can actually stabilize the situation.

He further pointed out that in the future, an “Allied Sovereign Supply Chain” should be established, composed of the United States, Japan, South Korea, Israel, Europe, Mexico, and Gulf countries. This would involve decentralizing the layout of chip production, packaging and testing, materials, and components to create a secure and resilient global chip network, ensuring that high-level manufacturing capacity can be maintained in any emergency situation.

Export restrictions leave a generation gap, making it difficult for China to shake the global lead.

Regarding the United States' restrictions on chip exports to China, Baker believes that a polarized approach is not ideal. He does not support a complete blockade, nor does he agree with providing equally advanced products. Instead, he advocates for offering “one generation behind” versions, maintaining a strategic gap without forcing China into a desperate situation.

He estimates that before the implementation of export restrictions, China's gap from the world's most advanced processes was about six to eight years, and now it is about four years, but this gap may widen in the future. He also affirms the capabilities and diligence of Chinese engineers, believing that although they are restricted, they will still obtain some advanced GPUs in various ways, just in far fewer quantities than in an uncontrolled situation.

He specifically mentioned Chinese AI laboratories like DeepSeek, which can still make rapid breakthroughs despite hardware disadvantages, demonstrating strong engineering capabilities. However, he is skeptical about the R&D cost data released by some Chinese laboratories, believing there are elements of exaggeration.

If geopolitical conflicts break out, the global chip manufacturing process may regress by two years.

Baker then talked about the possibility that if the world is forced to revert to older chip manufacturing processes due to geopolitical conflicts or sanctions, it would mean that the entire world would go back two years. He gave an example: if the iPhone 17 cannot continue to use the latest processes, the global smartphone industry would have to revert to the performance and design level of the iPhone 16, and it would take about six months to redesign the chips to meet the specifications of the older processes.

The manufacturing ratio of Intel will definitely rise to maintain the American chip supply chain.

Regarding the U.S. government's investment of about 10% in Intel, Baker stated that afterwards, even if the chip manufacturing process lags half a generation or a generation behind and costs are higher, the U.S. government will still demand that American companies increase their order ratio with Intel. He believes that this “government-led ordering” strategy is very important for the security of the U.S. chip supply chain.

Baker also predicts that the most advanced products will continue to be produced in Taiwan in the short term, but as the effects of Intel's 18A and 14A become evident, the proportion of domestic manufacturing in the United States will gradually increase.

This article is by Mei Chip investment expert: Even if China goes to war, it won't be able to obtain TSMC, as the US, Japan, and South Korea have already laid out semiconductor defenses. It first appeared in Chain News ABMedia.