The world's top chipmakers can flip a 'kill switch' should China invade Taiwan, Bloomberg reports

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Two of the world's most important chip companies can flip a "kill switch" remotely on their most advanced chipmaking machines should China invade Taiwan, Bloomberg reported on Tuesday, citing people familiar with the matter.

The Netherlands' ASML — Europe's top tech company by market value — supplies advanced machines to chipmaking companies. They include Taiwan's TSMC, which produces, by some estimates, 90% of the world's most advanced processor chips.

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The news of a forced shutdown, or a "kill switch," on ASML's chipmaking gear comes amid intensifying rivalry between Washington and Beijing and mounting concerns over a potential Chinese invasion of Taiwan, which Beijing claims as its own territory.

Taiwan is the world's epicenter for semiconductor chips, the ubiquitous parts that are used in products from data centers to smartphones. A war in the region would have major consequences for the global economy.

The US, citing national security concerns, imposed restrictions on China under the Advanced Computing Chips Rule in November. The restrictions make it harder for the East Asian giant to import advanced AI chips from American manufacturers.

The US has also pressured the Netherlands to block some ASML exports to China to limit the country's ability to manufacture advanced chips. The Dutch company has also said it will stop servicing some equipment previously exported to China.

But US concerns over a Chinese invasion of Taiwan remain, and Washington has expressed them to Dutch and Taiwanese officials, Bloomberg reported. ASML assured Dutch officials about the option to push the "kill switch" when they met with the company, per the media outlet.

The option applies to ASML's line of advanced extreme ultraviolet machines, according to Bloomberg.

Taiwan's TSMC is the largest buyer of these 200 million euro, or $217 million, machines. They print the tiny microchip transistors used to make chips for artificial-intelligence and military applications.

Rising concerns over Taiwan Strait developments

There are concerns about China's intensifying drills around Taiwan after itn inaugurated its new president, William Lai — whom Beijing has branded as a separatist — on Monday.

Beijing stepped up military activity around Taiwan ahead of Lai's inauguration and on Thursday announced drills as a "strong punishment for the separatist acts of 'Taiwan independence' forces," Li Xi, a spokesperson for China's People's Liberation Army, said.

Chipmaking supply chains are changing amid heightened geopolitical tensions.

TSMC is diversifying production with a second facility in Arizona and upcoming new plants in Japan and Germany. But new facilities will take time to come online.

The US is also taking steps to boost chip manufacturing through the CHIPS Act, which provides billions of dollars in subsidies for domestic production, research, and workforce development.

But Nvidia CEO Jensen Huang told Bloomberg TV on Tuesday that that the world's tech sector is likely to continue depending on Taiwanese manufacturing for "some time." He said it would be "very difficult" for Nvidia to serve its customers without the island.

ASML and the Dutch government declined to comment to Business Insider.

TSMC did not immediately respond to requests for comment from Business Insider. The company declined to comment to Bloomberg.