Taipei, Aug 3 Taiwan says China's drills amount to a blockade - and spiralling tensions could have a knock-on effect on products around the world, local media reported.
That's because Taiwan-made computer chips power everything from smartphones to cars and watches to fridges.
The island is where some of the world's biggest technology companies go to get semiconductors made. Taiwan dominates the market for chip foundries, or outsourced semiconductor manufacturing, BBC reported.
Last year, the country's contract semiconductor makers accounted for more than 60 per cent of the world's total chip foundry revenue.
And setting up chip manufacturing plants is no simple task - it takes time, a skilled workforce and money.
For example, at the end of last year Taiwan Semiconductor Manufacturing Co (TSMC) - which dominates the global market and has tech giants including Apple, Qualcomm and Nvidia as customers - said it would open a new factory in Phoenix, Arizona.
However, the plant is not expected to start operations until 2024 and will cost around $12bn, BBC reported.
Just 16 minutes after US House Speaker Nancy Pelosi touched down on Tuesday night, China announced it would hold days-long military drills - which would include firing "long-range ammunition" - in the waters around Taiwan.
Beijing said those drills would begin on Thursday and has demanded foreign ships and aircraft not enter the zone during that period. The seas around Taiwan are busy shipping routes. Taiwan says China's actions amount to a blockade in breach of international law.
China has also retaliated with economic blows - blocking the trade of several key products between Taiwan and the mainland, and banning more than 100 Taiwanese food businesses, BBC reported.
It also blacklisted two Taiwan organisations it said were linked to the independence movement. Beijing has also called in the US Ambassador to China.
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