Hammond-Chambers said the recent destruction of a satellite by a Chinese ICBM renewed concerns over China's military intentions and its "peaceful" rise in Asia. "It also drew the world's attention to potential flash points, including Taiwan and the possibility that China would resort to using force to reunify with the island," he said.

The missile test took place just prior to the release of the council's "Semiconductor Report -- Annual Review 2006, " which anticipates that Taiwan will become the world's leading manufacturer of DRAM chips in 2007, Hammond-Chambers noted.

He quoted the report in highlighting Taiwan's strategic importance in the chip industry. Taiwan is home to the world's highest concentration of advanced 12-inch semiconductor fabrication plants.

He also quoted data from Taiwan's Institute for Information Industry that indicates that Taiwan is not only the leading producer of important semiconductor technologies like DRAM,but Taiwan companies are also responsible for a significant share of global technology production, including approximately 82 percent of notebook computers, 98 percent of motherboards, and 72 percent of LCD monitors.

U.S. companies sourced an estimated US$73.3 billion of technology products from Taiwan in 2006 alone, an 11 percent increase over 2005, he added.

Hammond-Chambers said the global economy is increasingly reliant on the supply chain synergies that run through Taiwan and its regional partners. "These partnerships produce many of the technological products on which we have become reliant, and which improve business productivity and empower consumers. Present trends point towards Taiwan strengthening its position in certain key sectors, particularly in semiconductors," he added.

Hammond-Chambers said the council is concerned about the potential costs to the United States if that critical supply chain is severed by "acts of god" such as an earthquake like that which struck in 1999, or if provocative actions undertaken by Beijing resulted in an extended supply chain disruption.

Semiconductors are critical not only to commercial businesses, but also to modern warfare, he said, adding that a reliable and robust supply base is a crucial component of any country's modern military. This is true in particular for the United States, as it relies on a single semiconductor manufacturer to provide it with all of the chips it requires for national security, and where additional supplies of chips must come from commercial sources, he said.