Taiwan is a jewel that could quickly shatter into dust. There are persistent rumors that the ASML tooling (and other key fab machinery) is rigged for sabotage. If China were to mount a serious invasion attempt then Taiwanese security forces or TSMC employees would wreck the machinery beyond repair. This implicit threat acts as a deterrent against invasion.
Even if China could capture the ASML tooling intact it would only be useful for some reverse engineering. Actual production requires both skilled local employees and ongoing support from headquarters back in the Netherlands.
To further add to the parent, think about how stupid it is to turn off an money printing machine. China did exactly when it mismanaged Hong Kong. Hong Kong USED to be financial titan.
First, Taiwan sees HK and knows what's up. You don't sleep next to an elephant all your life and not know when they will roll over.
Second, even if Taiwan didn't rig for sabotage AND (big AND) just straight up surrendered (it won't); People will slowly leave, turn over will happen, machines will age out, the right investments will not be made, etc. Taiwan may not shatter (immediately), but it will rust and dull. Look at HK and I believe that is the BEST case scenario for the China.
For Taiwan, semi-conductors represent a poison pill/porcupine defense. But that is all that is, defense/poison. It won't stop China if the leaders decide that it would just eat the consequences. I hope Taiwan can find a creative solution to their woes.
For China, they have to realize they are on a timer. They can't keep "turning off money machines", or "crushing jewels". At some point they are going to run out of "resources" to extract and I hope they figure out how to work with countries in their region instead of antagonizing them. Why? because 1+ billion people will suffer if they don't figure it out.
Which is why the USA essentially forced TSMC to build a fab here. That reduces China's potential leverage and provides some geographic redundancy. Even if China never invades, TSMC production in Taiwan could be crippled by a natural disaster or labor action or local political crisis or something.
Even if China could capture the ASML tooling intact it would only be useful for some reverse engineering. Actual production requires both skilled local employees and ongoing support from headquarters back in the Netherlands.