BT held “war games” to prepare for the disruption from a potential conflict between China and Taiwan, in a sign of companies’ growing unease over escalating tensions in the region.
Staff at the telecoms group’s Dublin-based procurement business took part in the two-day exercise last year, during which they modelled how they would secure BT’s supply chain against the fallout of a military clash, according to two people familiar with the matter.
The simulation was held after the then US House Speaker Nancy Pelosi visited Taiwan in August, prompting China to stage unprecedented military drills around the island. The BT exercise involved a scenario where Beijing sank a ship near Taiwan, a key supplier of semiconductors to the telecoms industry, one of the people said.
Beijing’s threats towards Taiwan have prompted concerns about a rupture to the global supply chain that for years has relied on smooth global trade.
Taiwanese chipmakers, which produce semiconductors for Apple, Google and other tech groups, are responsible for more than 60 per cent of the world’s contract chipmaking capacity, while they dominate cutting-edge semiconductor production, according to a US government paper.
After the scramble for various commodities, parts and products caused by the Covid-19 pandemic and last year’s Russian invasion of Ukraine, more companies are trying to ensure they are prepared for deepening geopolitical ructions. In Germany, business lobbies have voiced concerns about the secondary impacts of global sanctions on Beijing in the event of a war over Taiwan.
Johan Gott, co-founder of US political risk consultancy Prism, which assisted with BT’s crisis simulation, said supply chains were “suddenly on the front lines of geopolitical [tensions]”. Although such simulations have mainly been practised by government and defence officials, the consultancy has run contingency exercises for an increasing number of corporate clients.
China’s stance on Taiwan is unnerving business and political leaders. It recently launched more military exercises after Taiwan’s President Tsai Ing-wen met current US Speaker Kevin McCarthy in California.
Last week, European leaders warned President Xi against a military escalation over Taiwan. Xi has stuck to the longstanding Communist Party position that it reserved the right to use force over Taiwan, which it considered to be part of its territory.
The electronics, cars and telecoms industries are all expected to be severely affected in the event of a disruption to Taiwan’s chip supply chain, with the Semiconductor Industry Association in the US estimating lost revenues at $500bn for electronics manufacturers that depend on this supply alone.
But with semiconductors powering virtually every aspect of modern day life, the impact of a Taiwan conflict would inevitably stretch far beyond sectors that procure semiconductors from the island, said executives.
Rhodium Group, an economics and policy research firm, said that the global disruption from a Taiwan conflict “would put well over $2tn in economic activity at risk, even before factoring in the impact from international sanctions or a military response”.
Gott said simulations are delivered through a series of fictional news flashes, such as during a video call. This puts “stress on participants” forcing them to “make decisions under time pressure”, he said.
Paul Kenealy, co-founder of cyber security consultancy Darkbeam, which also assisted BT by simulating incidents that would affect its operations, said the telecoms group was seeking to keep “the UK’s critical national infrastructure working”.
Both Cott and Kenealy declined to comment on specific events that they helped simulate for BT.
BT said that “like many businesses, we regularly run simulations to stress test our business on a range of scenarios as part of our risk management and planning”.
Additional reporting by Yuan Yang in London and Kathrin Hille in Taipei