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Taiwan is particularly vulnerable to the energy crunch being caused by the Israel-U.S war with Iran, and which has effectively removed roughly 20% of global liquefied natural gas (LNG) supply, Oxford Economics warned in a report released March 19.
The island nation, which produces the majority of advanced semiconductors critical to artificial intelligence, smartphones, defense systems, and computing, has increased its reliance on natural gas since the 2025 decommissioning of the Maanshan nuclear plant.
Although Taiwan’s grid architecture is likely to shield semiconductor fabrication initially, the firm’s modelling suggests this resilience will likely be temporary. “Leading-edge fabrication is acutely sensitive to power supply stress: while energy supply prioritization can protect fabs in the near term, sustained constraints will eventually cut into chip production,” said Head of Asia Economics, Louise Loo.
“Spillover effects across Asia’s tech-dense supply chains will operate with a lag, so near-term data resilience should not be mistaken for immunity,” added Loo. “Robust inventory buffers and the region’s distributed mature-node reliance will cushion the initial energy shock.”
Still, replacing Qatari LNG is a tricky supply challenge for the region, with Japan and South Korea also “incredibly exposed,” Loo said. Contract terms limit alternative sourcing, and spot cargoes are likely to become increasingly expensive. The adjustment is therefore likely to fall mostly on state utilities’ balance sheets, though history suggests industrial output won’t be completely insulated.
Oxford Economics was founded in 1981 as a commercial venture with Oxford University’s business college to provide economic advice, forecasts and analytical tools to international institutions, governments and blue-chip companies.
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