Fab-ricating Friends? Taiwanese Semiconductor Dependence and Diplomatic Alignment in the UN General Assembly

Abstract

This paper tests the silicon shield hypothesis, which holds that global dependence on Taiwan’s semiconductor industry generates measurable diplomatic alignment with the US-led bloc. Using a 2003-2024 country-year panel, product-level trade exposure measures for HS 8541 and HS 8542, and a Bartik shift-share instrumental variables strategy drawing from Goldsmith-Pinkham, Sorkin, and Swift (2020) and Borusyak, Hull, and Jaravel (2022), I find that the cross-sectional correlation between Taiwan semiconductor dependence and US-bloc alignment reflects stable country characteristics rather than any causal effect of chip sourcing on diplomatic behavior. Once country fixed effects are introduced, the relationship attenuates substantially, and where the instrument provides credible identification, the within-country effects are negative rather than positive. Six-digit specifications for HS 854231, the product category containing TSMC’s most advanced logic chips, show a negative and significant within-country association across both outcome measures, reinforcing this conclusion. Supply-side evidence from an on-the-record interview with a former Taiwanese minister, an official Ministry of Foreign Affairs response, and several public statements by senior officials points toward a deliberate Taiwanese policy of non-coercion that provides a coherent mechanism for the demand-side null. The silicon shield may raise the costs of conflict by creating economic dependencies, but it does not appear to generate the diplomatic loyalty that the hypothesis implies.