Former President Donald Trump on Tuesday suggested that Taiwan should compensate the U.S. for its protection against China. This statement has raised questions about the future of U.S. support for Taiwan, especially if Trump is re-elected in the upcoming November presidential elections.

Trump’s Taiwan Comments: Trump’s comments led to a steep decline of 8% in shares of Taiwan-based AI chip giant TSMC, also known as Taipei’s “crown jewel.”

The comments not only sparked worries for Taiwan, but the impact of it was also seen in the stock of TSMC buyers, such as Apple Inc. ( AAPL ) , Nvidia Corp. ( NVDA ) , Qualcomm Inc. ( QCOM ) , and Advanced Micro Devices, Inc. ( AMD ) , that rely on the company for essential components.

This comes at a time when the chip industry is undergoing significant changes, with AI chips advancing rapidly and concerns growing over the fragility of the semiconductor supply chain. TSMC’s location in Taiwan, a territory claimed by China, puts the tech industry and the future of AI in a precarious geopolitical position.

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What War With China Means For Taiwan:

Chris Miller, author of “Chip War: The Fight for the World’s Most Critical Technology,” in an interview with Business Insider earlier, expressed serious concern about the international situation and its potential impact on AI progress if China decided to invade Taiwan. He highlighted that any conflict in the Taiwan Strait could lead to a rapid shutdown of TSMC, disrupting the semiconductor supply chain.

“I don’t think it’s less likely,” Miller said, citing the darker international situation with conflicts in Ukraine and the Middle East, and China’s actions in the South China Sea. “If you look at what China is doing right now in the South China Sea, with regard to the Philippines, they’re doing that in no small part because they know they can get away with it because the U.S. is overstretched.”

“The moment conflict starts in the Taiwan Strait, you have to assume that TSMC shuts down very, very quickly regardless of what any of the players decide to do — regardless of whether anyone decides to disrupt the supply chain or destroy this or that or not.”

“This is a dispute that implicates every aspect of the American economy in a potentially catastrophic way. There’s not a silver lining — that’s the reality. It’s dark and it’s high stakes.”

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China Squeezing Taiwan To Accept Sovereignty Claims:

China has been pushing for integration and peaceful reunification with Taiwan. Chinese President Xi Jinping had earlier reiterated the “one country, two systems” proposal for Taiwan, emphasizing the need to reunite the motherland.

Xi’s government has recently been ramping up military and political pressure to try and get Taipei to accept Beijing’s sovereignty, including staging war games near the island and warplanes into Taiwan’s air defense zone.

US Ramping Up Domestic Chips Production:

Meanwhile, Trump’s comments come at a time when the U.S. is already taking steps to bolster its semiconductor industry. In April, the U.S. government announced a $6.6 billion funding for TSMC’s Arizona plants, as part of the CHIPS and Science Act. This move was aimed at bringing the manufacturing of the world’s most advanced chips to American soil.

Moreover, the Biden administration has recently launched a program to develop the U.S. computer-chip workforce, utilizing part of the $5 billion federal funding allocated for the National Semiconductor Technology Center (NSTC). This initiative aims to prevent a labor shortage that could hinder domestic semiconductor production.

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This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.