By Ben Blanchard, Max A. Cherney and Wen-Yee Lee
TAIPEI, June 8 (Reuters) - As AI heavyweights including Nvidia, Intel and SK Group last week championed Taiwan's significance as a crucial hub for the global supply chain, a hostile exchange with China was brewing at sea.
On the final day of the high-profile Computex conference in Taipei on Friday, Taiwan's coast guard faced off against Chinese counterparts in the contested South China Sea.
"Peace in the Taiwan Strait is vital to the stability of the global
economy, and the lifeline of the technology industry," Taiwan's coast guard broadcast in a warning to a Chinese vessel near the Taiwan-controlled Pratas Islands.
Taiwan is home to TSMC, the world's largest contract chipmaker and supplier to Nvidia and Apple, and Foxconn, Nvidia's largest server maker, along with dozens more companies working across the AI hardware stack.
China views the democratically governed island as its territory, and Beijing has stepped up military pressure to assert its sovereignty claims in recent years, particularly over the past month.
During the June 2-5 Computex event, Taiwan's defence ministry reported 79 Chinese warplanes operating near the island, a stark reminder about the risk to the global AI supply chain should Beijing ever make good on threats to take Taiwan by force.
On Wednesday, China's military held another "joint combat readiness patrol" around Taiwan.
China's defence ministry did not respond to a request for comment about its activities last week.
Billions of dollars are being invested in Taiwan to produce the hardware needed to power the AI revolution, but there is a potential sting in the tail, said David Feith, senior fellow at U.S. think tank the Hudson Institute and a former U.S. Deputy Assistant Secretary of State.
"There's an enormous security threat, and it emanates from Beijing," he told Reuters on Saturday at a forum in Taipei held by DEST, Taiwan's National Science and Technology Council-backed think tank.
"I do think that markets globally and governments, I fear, are underestimating the risk of a crisis."
JENSEN HUANG STEALS THE SPOTLIGHT
Nvidia CEO Jensen Huang said last month the company plans to spend about $150 billion annually in Taiwan, up from roughly $10 billion to $15 billion five years ago, while AMD CEO Lisa Su, who was not in Taiwan for Computex but visited shortly before, has announced investment of more than $10 billion in Taiwan's AI industry.
Huang batted away a question about security at his news conference on Tuesday, saying the supply chain should be as "diversified and as redundant" as possible so that there can be resilience, and pointed to Taiwan tech firms investing in the U.S.
"However, it doesn't change the fact that Taiwan is incredible at manufacturing, especially technology manufacturing," he added. "This is the epicentre of the ecosystem."
TAIWAN'S 'RESPONSIBLE COMMITMENT'
Taiwan President Lai Ching-te, speaking at the opening of Computex, was more direct.
"The government will firmly safeguard peace and stability across the Taiwan Strait and is committed to maintaining the status quo," he said.
"This is an unwavering national policy, as well as Taiwan's most responsible commitment to the global technology supply chain."
Computex has a small military dimension, with several drone companies taking part.
Lai has made drones a key plank of his military modernisation programme.
Palmer Luckey - founder of U.S. drone maker Anduril Industries, which is jointly developing a missile with Taiwan - toured the show on Thursday, and told the official Central News Agency that there are now around 30 Taiwanese companies in his firm's supply chains.
"There are things in this world that only exist because Taiwan is the leader in technology, and that's not something that I want to disappear," he said.
(Reporting by Ben Blanchard, Max A. Cherney and Wen-Yee Lee; Editing by Anne Marie Roantree and Kevin Buckland)
