Unpredictable Pressure Tactics in the Taiwan Strait and Semiconductor Supply Chain Risks

Executive Summary

In August 2026, during Taiwan’s Han Kuang exercises, China shifted to unpredictable tactics, opting for silence and brief, dismissive commentary instead of its usual large-scale counter-drills. Official Chinese vessel activity around Taiwan reached a three-month high of 118 instances in August, a period that coincided with a U.S. aircraft carrier vacuum in the Western Pacific due to the prolonged war in Iran. Taiwan’s Ministry of National Defense assesses that China used this as an opportunity to test the limits of the United States’ ability to respond to two simultaneous theater conflicts. The most likely future path is the normalization of gray-zone pressure (55% probability), with the core risk being not a physical blockade but a cumulative geopolitical premium on the semiconductor supply chain. The South Korean government and companies should pursue a parallel strategy of supply chain diversification, redesigning early-warning indicators, and re-examining ROK-U.S.-Japan carrier operation scenarios, rather than betting on a specific conflict scenario.

I. Situational Analysis

China's Escalating 'Unpredictable' Military Pressure Around Taiwan

1. Background and Developments

The institutional origin of tensions in the Taiwan Strait is the peaceful unification policy introduced by Deng Xiaoping in 1979. Beijing’s calculation at the time was that stable cross-strait relations were necessary to prioritize economic development. This premise began to falter in 2019 with the imposition of the Hong Kong National Security Law. Taiwanese public opinion shifted dramatically after witnessing Beijing’s harsh crackdown on Hong Kong’s pro-democracy protests. Support for gradual independence doubled from 12.8% in 2018 to 25% in 2019. During the same period, support for unification plummeted from 12.8% to the 6-7% range [3][9].

The Chinese military’s activities around Taiwan have since become a form of routine pressure. Beijing, which considers Taiwan part of its territory, has never ruled out the use of force. The Chinese military has deployed forces in the waters and airspace around Taiwan almost daily [1]. However, China’s response during Taiwan’s annual Han Kuang exercises in August 2026 marked a clear departure from previous patterns. Instead of its past practice of conducting large-scale counter-drills in response to Taiwan’s defensive exercises, China remained silent until the exercises concluded, then issued only a brief, dismissive commentary [3][9]. Taiwan’s Ministry of National Defense has characterized this as a unique ambiguity tactic designed to make the timing and intensity of its reactions unpredictable [3].

2. Current Situation

The annual threat assessment released by Taiwan’s Ministry of National Defense substantiates China’s strengthening air and sea control with concrete figures. The frequency of official Chinese vessel activity around Taiwan reached 118 instances in August, setting a new high for the third consecutive month [1][6]. In July, the number of routine vessel entries—a metric distinct from traditional early-warning indicators like large-scale military aircraft incursions—had already peaked at 244 [3]. Interviews conducted by the Brookings Institution with figures in Taipei confirm similar observations. While the frequency of air incursions has somewhat decreased, a new pattern is emerging: maritime threats led by coast guard vessels are expanding to Taiwan’s eastern coast [2].

This period coincidentally overlaps with a U.S. aircraft carrier vacuum in the Western Pacific. Due to the prolonged war in Iran, the USS Abraham Lincoln was deployed for over 260 consecutive days, prompting the U.S. Navy to redeploy even the Yokosuka-based USS George Washington to the Middle East. This resulted in a situation where there was virtually no aircraft carrier presence in the Western Pacific [6]. Taiwan’s Ministry of National Defense assesses that China is using this gap as an opportunity to test the limits of the United States’ ability to respond to two simultaneous theater conflicts in a real-world setting [1][6]. The ministry's threat assessment also included the judgment that China is learning lessons from the difficulties the U.S. has faced in the Iran war [1].

During the same period, China launched a submarine-launched ballistic missile (SLBM) from the South China Sea into the Pacific Ocean. The missile is understood to have passed over the Philippines, flown south of Guam, and landed within the South Pacific Nuclear-Free Zone [18]. At the Pacific Islands Forum (PIF) summit in Palau, a Chinese special envoy warned regarding the attendance of a Taiwanese delegation, stating it was "highly inappropriate" and that "there will always be a price to pay" [4][10][12][14]. In the defense sphere, the revision of the National Defense Mobilization Law for the first time in 16 years is interpreted as a measure reflecting Beijing’s increased uncertainty about U.S. military power [15][17].

3. Key Actors and Positions

Taiwan's Ministry of National Defenseformalized its recognition of the shift in China's response tactics through its latest threat assessment. Previously, there was a clear pattern where China's counter-drills were proportional to the scale of Taiwan's exercises or U.S. naval transits. However, Taiwan's assessment is that this correlation has broken down in the recent phase [1][3]. In response, the Taiwanese government passed a budget in the Legislative Yuan to procure NT$240 billion (approx. US$7.6 billion) worth of drones over six years. This bill, which mandates prioritizing domestically produced drones, is strongly characterized as an effort to bolster asymmetric response capabilities against gray-zone threats [13]. Taiwan's defense budget reached US$18.2 billion, or 2.1% of GDP, marking the largest increase (14%) since 1988 [8].

The Chinese government and the People's Liberation Army (PLA)are opting to communicate their intentions through physical signals, such as the routine deployment of ships and aircraft, rather than official statements. Separate from its silent tactics in the Taiwan Strait, Beijing has issued explicit warnings on the diplomatic stage of the Pacific Islands. This can be seen as a dual approach that combines military ambiguity with diplomatic clarity [4][10][12][14]. Experts cited in a South China Morning Post (SCMP) report analyze that the PLA is shifting its focus from the superiority of individual weapon systems to building capabilities for 'systems warfare' that integrates intelligence, artificial intelligence, communications, and logistics [7].

The United Statesis facing structural constraints in its aircraft carrier operations due to the prolonged war in Iran. A Council on Foreign Relations (CFR) report assessed that the U.S. military is unprepared, both in terms of weapon systems and production capacity, to deter and defeat a Chinese invasion or blockade of Taiwan [5]. This is cited as an example of the structural limitation of being unable to handle two theaters simultaneously with an 11-carrier fleet [6].

Pacific Island Countrieshave emerged as a new arena for China-Taiwan competition. At the 2026 PIF summit, the leaders of several member states were absent amid suspicions of external interference. This suggests the political burden that smaller nations in the region face due to pressure from great power competition [4][10].

4. Key Issues

The first issue is the loss of validity of early-warning indicators. The traditional signaling system, such as large-scale military aircraft incursions or proportional counter-drills, is being neutralized. A new indicator—the frequency of routine vessel entries—has emerged, but it has the limitation of being a gray-zone indicator from which it is difficult to identify a specific threshold [3][9].

The second issue is the sustainability of the U.S. carrier gap. It is unclear whether the force vacuum in the Western Pacific will be structurally resolved even after the war in Iran ends. The possibility is raised that fundamental constraints on carrier operations may persist regardless of when the Iran war concludes [6].

The third issue is the geographical expansion of pressure. Tensions once confined to the Taiwan Strait are expanding to the diplomatic arena of the Pacific Islands and missile tests in the South China Sea. This shows a transition from a single-strait issue to a matter of the balance of power across the entire Indo-Pacific region [4][10][18].

II. In-Depth Analysis

China's Escalating 'Unpredictable' Military Pressure Around Taiwan

1. Analysis of Root Causes

The root cause of the current situation lies in China's strategic dilemma. Large-scale counter-drills send a clear signal, but they also have the weakness of giving Taiwan and the United States time to prepare a response. Beijing remained silent during the Han Kuang exercises and then issued only a brief, dismissive commentary. This represents a choice to forgo clarity in signaling and instead weaponize uncertainty itself [3][9].

This choice was made possible by the U.S. aircraft carrier vacuum in the Western Pacific. Due to the prolonged war in Iran, the USS Abraham Lincoln was deployed for over 260 consecutive days. With the Yokosuka-based USS George Washington also redeployed to the Middle East, there was virtually no carrier presence in the Western Pacific [6]. Taiwan’s Ministry of National Defense assesses that China used this period as an opportunity to test the limits of the United States’ ability to respond to two simultaneous theater conflicts in a real-world setting [1][6]. In essence, the absence of a deterrent created the conditions for a change in the form of pressure.

A second cause is the structural shift in Taiwanese public opinion. After the 2019 imposition of the Hong Kong National Security Law, support for gradual independence jumped from 12.8% to 25%, while support for unification fell to the 6-7% range [3][9]. From Beijing's perspective, this signaled that the premise of peaceful unification was no longer valid. In a situation where pressuring public opinion with large-scale drills was becoming less effective, China can be seen as having shifted to using unpredictability itself as a new tool of coercion.

A third cause is the learning of integrated operations concepts observed in the wars in Ukraine and Iran. The People's Liberation Army (PLA) is shifting its focus from the superiority of individual weapon systems to the ability to integrate intelligence, AI, communications, weapons, logistics, and infrastructure into a single combat system [7]. The unpredictable response tactics, combined with this concept of 'systems warfare,' can be interpreted as an attempt to neutralize the adversary's early-warning indicators themselves.

2. Structural Context

In the political structure, the most important variable is the weakening effectiveness of the peaceful unification policy maintained since 1979. Deng Xiaoping’s calculation of managing cross-strait relations stably for the sake of economic development began to crack during the 2019 Hong Kong protests [3][9]. This crack has not healed since and has instead become the backdrop for Beijing's shift in Taiwan policy from one centered on incentives to one centered on pressure.

In the economic structure, the geographical concentration of the semiconductor supply chain is a key variable. Even if tensions in the Taiwan Strait become normalized, this will affect the supply chain not as a physical blockade but in the form of a persistent risk premium [3]. Companies that rely on a single region for foundry and back-end processing procurement are structurally more exposed to this premium.

In the security structure, the operational limits of the U.S. Navy's aircraft carriers are key. U.S. carrier forces face the structural constraint of having to accept a vacuum in one theater if they are deployed long-term in another [5][6]. The U.S. Navy's deployment of even its Yokosuka-based assets to the Middle East is an example of this constraint in action [6]. This is coupled with changes in Taiwan's own defense posture. Taiwan's defense budget increased by 14% year-on-year to US$18.2 billion, the largest annual increase since 1988 [8]. The Taiwanese Legislative Yuan also passed a budget for NT$240 billion (approx. US$7.6 billion) over six years for domestically produced drones [13]. However, it is also important to note that the implementation of this drone budget is being delayed by partisan conflict [19].

In the regional structure, diplomatic competition in the Pacific Islands is emerging as a separate front. When a Taiwanese delegation attended the Pacific Islands Forum (PIF) in Palau, a Chinese special envoy warned it was "highly inappropriate" and that "there will always be a price to pay" [4][10][12][14]. Following Nauru's severance of diplomatic ties with Taiwan in 2024, Beijing's pressure in the Pacific is assessed to be more systematic and intense than in any previous year [4]. This shows that the issue is not confined to the Taiwan Strait but is part of a broader strategy by China to shrink Taiwan's international space.

3. Historical Precedents and Comparative Cases

The large-scale encirclement drills conducted by China after U.S. House Speaker Nancy Pelosi's visit to Taiwan in August 2022 serve as a contrasting precedent to the current situation. At that time, China sent a clear deterrent signal by launching missiles into six zones around Taiwan and openly conducting large-scale exercises. In contrast, during the recent Han Kuang exercises, it responded with only silence and a brief, dismissive commentary [3][9]. Choosing a completely opposite response to the same trigger (Taiwan's defense exercises) can be read as a sign that Beijing is recalculating the utility of signaling itself.

Nauru's 2024 severance of diplomatic ties with Taiwan was a previous watershed moment in the diplomatic contest over the Pacific Island countries [4]. The recent situation at the PIF in Palau differs in that the intensity of pressure has become just as systematic, even without a decisive event like a switch in diplomatic recognition. The tactics have evolved, moving away from reliance on visible events like breaking ties toward an accumulation of routine warnings and exclusionary pressure.

The wars in Ukraine and Iran are serving as a direct source of military lessons for China. Taiwan’s Ministry of National Defense assessed that China is learning from the difficulties the U.S. has faced in the Iran war [1]. PLA experts also point out that both wars have demonstrated the power of integrated operations and target expansion to include civilian infrastructure [7]. Unlike in the past, when China's military modernization relied mainly on its own drills and weapons acquisition, there is now a clear trend of learning from real-time combat data from other countries' wars and reflecting it in its own tactics.

China's revision of its National Defense Mobilization Law is also a historically unusual case. This revision, the first in 16 years, updated the legal basis for mobilizing national defense resources and coincided with a period of increased uncertainty in Beijing about U.S. response capabilities [15][17]. While this should be interpreted as a warning rather than a declaration of war, it is assessed to have strengthened implementation capabilities compared to the previous mobilization law system, as it has established the institutional foundation for rapidly converting civilian resources into defense power [17].

4. Key Variables Shaping Future Developments

The first variable is the timing of the return of U.S. aircraft carrier forces to the Western Pacific. Even if the war in Iran ends and the USS Abraham Lincoln and USS George Washington return to their original deployment areas, the trend of a lowered threshold for gray-zone activities is likely to persist for a considerable time [6]. This means that the resolution of the carrier vacuum is unlikely to lead directly to an easing of pressure.

The second variable is whether Taiwan redesigns its early-warning system. Traditional indicators like large-scale military aircraft incursions or major exercises are losing their validity in the face of routine vessel entries, which numbered 118 in August and 244 in July [1][3][6]. The speed at which Taiwan can establish new detection indicators centered on coast guard vessels will determine its future crisis management capabilities.

The third variable is the shifting positions of the Pacific Island countries. Several Pacific leaders were absent from the recent PIF summit amid suspicions of foreign interference [4][10]. Whether Beijing's warnings lead some countries to actually sever ties or reduce participation, or whether the Pacific nations resist by asserting their "freedom to determine their own priorities and future" [12], will determine the direction of competition in this region.

The fourth variable is Taiwan's domestic capacity to execute its defense budget. Although defense spending has reached 2.1% of GDP, its largest increase since 1988 [8], partisan conflict over the drone budget is delaying its implementation [19]. The extent to which political infighting slows the actual pace of defense strengthening will determine whether Taiwan can secure its deterrent capabilities.

The fifth variable is the impact of China's revised National Defense Mobilization Law on actual resource allocation. Depending on whether the legal revision remains a symbolic measure or leads to expanded military use of civilian shipbuilding and shipping assets, it will be necessary to also examine the potential for an expanded intelligence-gathering role for state-owned shipping companies like Cosco [16].