“Ukraine continues to fight against the Russian invasion, while conflicts continue to break out in the Middle East,” Taiwan President Tsai Ing-wen told delegates. “It is clear that we cannot take peace for granted.”

Taiwan has teetered in a precarious geopolitical position for decades. It’s a self-governing democracy—it will elect its next president in January—but the Chinese Communist Party regards Taiwan as its own and seeks to unify the island with the People’s Republic, and the party says it will do so by force if necessary. 

Strategists consider a possible conflict a geopolitical crisis—and an economic one. Taiwan accounts for 30% of the $574 billion global semiconductor industry, the backbone of modern technology. At the heart of that industry is Taiwan Semiconductor Manufacturing Co., the most valuable company in Asia, whose $500 billion market cap puts it in the same league as Walmart. U.S. export controls on chipmaking equipment are squeezing out some TSMC buyers—namely China—but the Taiwanese firm still produces roughly 92% of the world’s most advanced chips. TSMC components power Apple’s iPhones, Nvidia’s AI servers, and F-35 fighter jets. Experts fret about what would happen to technology production if TSMC’s foundries fell into Beijing’s hands. A blockade of the island alone would cost the global economy $2 trillion, according to a Rhodium Group estimate.

Such fears have simmered for years, but a more emboldened Beijing and a more distracted U.S. are raising the prospect that after Russia’s invasion of Ukraine and Hamas’s attack on Israel, a conflict across the Taiwan Strait is next. That question weighs heavily on TSMC, which must consider how to protect vital assets, intellectual property, and employees in the ultimate worst-case scenario.  

Beijing frequently probes Taiwan’s defenses with military jets, drones, and warships, but live-fire drills encircling the island in August 2022 and again last April marked a sort of dress rehearsal of how Beijing could disrupt exports in a conflict. That sign of aggression, paired with Chinese President Xi Jinping’s order to modernize the People’s Liberation Army by 2027, has made Beijing’s threats of military intervention more credible, the U.S. Defense Department says.

Meanwhile, U.S. President Joe Biden, who has vowed to defend Taiwan if it is attacked, is also aiding Ukraine and Israel. In a sign of splintering U.S. attention, the Republican-led House approved money only for Israel in November, defying Biden’s request for spending for all three allies.

TSMC has said little about its plans in the case of war. It declined to comment for this story due to the sensitivity of the topic. Among five key TSMC suppliers, only ASML, a Dutch producer of lithography devices, mentions “scenario planning” for geopolitical risks in its financial statements. ASML declined to elaborate.

In a rare interview last year, TSMC chairman Mark Liu briefly addressed the risk his company faces by shooting down the idea that TSMC’s chip dominance incentivizes Beijing to invade. “Nobody can control TSMC by force,” he told CNN. TSMC depends on a real-time connection with suppliers in Europe, Japan, and the U.S. for everything from materials and chemicals to spare parts and engineering software, so any act of aggression “will render TSMC’s factory non-operable,” he said.

“All fabs in Taiwan require regular inputs of spare parts, gases, and chemicals from abroad,” agrees Chris Miller, author of Chip War: The Fight for the World’s Most Critical Technology. “It would be extraordinarily difficult to keep Taiwanese chipmaking facilities operational without these imported goods, materials, and maintenance services.”

TSMC has expanded outside of Taiwan to appease clients that want to diversify their supply chains. TSMC, which makes chips designed by its clients, is building new plants in Japan and Germany. A new advanced fabricator in Arizona is the star of Biden’s bid to revive U.S. chip production. 

But for the foreseeable future, TSMC’s advanced chip production and R&D at home are irreplaceable, and losing those facilities “would be catastrophic for the entire IT sector,” said Paul Triolo, senior associate at the Center for Strategic and International Studies. “The Arizona facility will be a small, single-digit percentage of TSMC’s overall capacity.” 

As TSMC stays mum on the invasion threat, commentators have drafted action plans of their own. One of the more outlandish is a “scorched earth” strategy, proposed in a 2021 U.S. Army War College quarterly, that would destroy TSMC facilities in Taiwan. The paper, the War College’s most-downloaded in the past two years, suggests that the U.S. blowing up the fabs would render the cost of war so high that Beijing would decide against it. 

A paper in the next edition of the same journal opposed the idea, arguing it undermines U.S. deterrence strategy by “telling our partners we are prepared to help them blow up the one industry that makes them economically relevant on the international stage.” 

A Taipei Times opinion piece rejected the notion, in part for its faulty premise. “China wanted Taiwan long before TSMC was churning out chips, and would want it even if TSMC had never existed.”

Other foreign companies and investors were getting twitchy even before the Israel-Hamas war. An American Chamber of Commerce in Taiwan survey said that as of December 2022, 47% of member companies “either have revised or plan to revise business continuity plans to address the new geopolitical climate.” The annual report of United Microelectronics Corp., another Taiwanese chip foundry, details the “countermeasures” it’s taking like building facilities in Singapore and Japan. The U.K.’s Brompton Bicycle is pulling its supply chains out of Taiwan and mainland China, citing cross-strait tensions. And Warren Buffett took a $4.1 billion stake in TSMC in late 2022, only to sell the entire position by spring, an unusually short holding period for the famed investor. “I don’t like its location,” he said of TSMC.

The risk of war in Taiwan “comes up in every single conversation we have with investors,” said Rolf Bulk, an analyst at New Street Research in Singapore. “It’s a risk that some investors are not willing to take.”

For all the angst, it’s mostly business as usual for ordinary Taiwanese.

“Threats from China are primarily background noise,” said Brian Hioe, a magazine publisher who also runs a café in Taipei. “People have grown used to this.”

Foreign direct investment in Taiwan hit a record $13.3 billion in 2022 but is expected to dip back down to normal levels this year. Idaho-based Micron Technology, the world’s third-largest memory chip maker, opened a plant in Taichung in November. 

Cooling foreign investment reflects shifting demand for chips; high-end components associated with generative AI are all the rage, while the market for “legacy” chips has softened, said Robert Carnell, head of research and chief economist for Asia-Pacific at ING. “So the outlook for Taiwan’s economy is looking up, but not spectacularly so.”

TSMC expects a rebound in chipmaking revenue in 2024 after a slump this year. But U.S.-Beijing tensions could still trip up the industry, TSMC’s 92-year-old founder, Morris Chang, said in October. “It looks like countries are mad at each other; that worries me.” 

This article appears in the December 2023/January 2024 issue of Fortune with the headline, “Ukraine. Israel. Taiwan?”