TSMC Photo: VCG

The Taiwan chip industry is facing a historic foreign capital flight amid the escalating tense situation in the Taiwan Straits sparked by Taiwan regional leaders, combined with the potential risks of a supply chain cutoff due to the ongoing tensions in Europe.

Affected by the growing uncertainty of the situation in the region, Taiwan stocks have recently become foreign cash machines, especially in some pillar industries of the island such as the semiconductor sector with local conglomerates such as Taiwan Semiconductor Manufacturing Company's (TSMC) foreign shareholding decreased significantly, media reported.

TSMC's foreign shareholding ratio has dropped to 73.37 percent as of Thursday, the lowest since 2011.

MediaTek, a Taiwanese fabless semiconductor company, also faced a decline in foreign shareholdings.

The secessionist Democratic Progressive Party (DPP) authority in Taiwan has been "self-indulging" in expressing so-called empathy for Ukraine's situation and vowed to enhance military readiness in the island.

The semiconductor industry is particularly in need of a stable and predictable security environment. The capital is very sensitive to the signals released by Taiwan authorities, and some believe that such signals may lead to an increase in the possibility of conflict in the Taiwan Straits, which partially contributed to their withdrawal, Ma Jihua, an industry veteran, told the Global Times on Friday.

The reason for the booming Taiwan semiconductor industry is they are part of globalization and multilateralism, which cannot be defined just by US technology, but the market and supply chain of the Chinese mainland, as well as raw materials for chip-making from countries such as Russia and Ukraine, experts said.

Such an advantage may be shaken in the face of a possible supply chain disruption in countries such as Ukraine and Russia, major producers of raw materials for semiconductors such as neon and palladium.

The rising tensions in the Taiwan Straits posed by the constant speculation and provocation of some Taiwan authorities serve one possible driver for the foreign capital flight, an industry insider told the Global Times on condition of anonymity on Friday, describing the move as "playing with fire" that will eventually hurt its own business.

Foreign investment in the region also appeared to be the similarly dropping that even captured the attention of some US media, describing the flight as "bigger than the global financial crisis in 2008."

In the three weeks following the Ukraine crisis, foreign investors dumped shares worth about NT$ 480 billion ($16.9 billion), CNN reported on Wednesday, citing Alex Huang, a director at Taipei-based Mega International Investment Services.

It is the biggest [route] on record so far - even bigger than the global financial crisis in 2008, according to Huang, the report said.

Taiwan Affairs Office of the State Council spokesperson Ma Xiaoguang noted last month that the DPP authority has been playing along with the US and Western rhetoric and exploiting the Ukraine issue to maliciously hype the "military coercion" from the Chinese mainland.