Report: China Could Cripple US Supply Chains by Choking Taiwan’s Energy

Report: "Energy Siege" Could Starve Taiwan of Power and Halt Global Chip Production

A new report from the Foundation for Defense of Democracies (FDD) warns that Beijing could attempt to force Taiwan's capitulation not through a large-scale invasion but by strangling the island's fuel and electricity supplies until its government folds. Rather than opening with missiles, the campaign would begin with paperwork, patrols and covert cyber operations designed to throttle imports while preserving plausible deniability.

What the Simulation Showed

FDD and Taiwan’s Centre for Innovative Democracy and Sustainability at National Chengchi University ran a tabletop exercise this summer called "Energy Siege." Teams representing China, Taiwan, the United States, Japan and other partners wargamed a months-long gray-zone campaign in which administrative slowdowns, new customs rules, cyber intrusions and disinformation were used to constrain liquefied natural gas (LNG) and coal deliveries to Taiwan.

The exercise concluded that a sustained squeeze on LNG imports could cripple Taiwan's electrical grid within weeks and trigger a global semiconductor shock, because Taiwan supplies roughly 60% of the world's chips and about 90% of the most advanced nodes.

Gray-Zone Tactics: Cyber, Bureaucracy and Disinformation

Central to the modeled campaign were cyberattacks and information operations. The report notes Chinese hackers have increased successful intrusions into Taiwanese energy systems, and the simulation envisioned malware embedded in LNG terminals and power-plant controls to disrupt shipments and distribution. Simultaneously, Beijing would exploit false narratives—rumors of blackouts, fuel hoarding and government failure—to undermine public trust and morale.

"Beijing's goal isn't to invade today, but to make Taiwan believe resistance is futile tomorrow," said report author Craig Singleton, describing a strategy of "slow-motion strangulation" that could be followed by sudden military pressure.

Why Taiwan Is Vulnerable

Taiwan imports nearly all its energy: about 50% comes from natural gas and roughly 30% from coal, and the island holds only a few weeks of reserves. Its three main LNG terminals and the Taichung coal offloading port are clustered on the west coast, within reach of missiles as shipments transit the narrow lanes of the Taiwan Strait. That combination makes Taiwan one of the world's most energy-insecure economies.

In a simulated blockade or "energy quarantine," the island's power generation could be cut in half within weeks, forcing excruciating choices about which sectors to prioritize—hospitals, essential services or chip fabs such as TSMC and UMC.

Global Consequences and Policy Recommendations

The report stresses immediate global implications: a prolonged outage in Taiwan could halt electronics and defense manufacturing worldwide, striking U.S. supply chains and markets quickly. To increase resilience, the authors recommend expanding U.S. LNG export capacity (noting projects in Alaska as a priority), building larger on-island LNG reserves in Taiwan, and preparing the U.S. Navy to escort critical deliveries.

Co-author Mark Montgomery warned: "Beijing believes pressure plus patience equals political collapse. What unnerves China isn't Taiwan's defiance, but its people's ability to withstand coercion."

Takeaway

While the scenario remains hypothetical, the exercise illustrates how administrative measures, cyber operations and disinformation could combine into an effective nonkinetic campaign that narrows the line between peacetime pressure and a crisis in which the first blow might never be a fired shot.