As China drives the world to avoid official affairs with Taiwan, leaders around the world are realizing how dependent they have become on island democracy.
Taiwan, which China considers a province, is praised for its ability to make leading-edge computer chips. It mostly depends on Taiwan Semiconductor Manufacturing Co., which world’s largest foundry and producer of chips for Apple Inc. smartphones, artificial intelligence and high-performance computers.
Taiwan’s role in the world economy largely remained under the radar until it came the recent notoriety because the automotive industry has a shortage of chips used for parking sensors to reduce emissions. Since car manufacturers, including the Volkswagen Volkswagen AG, Ford Motor Co. of the United States and Toyota’s Toyota Motor Corp., forced to cease production and idle plants, the importance of Taiwan suddenly became too great to ignore.
US, European and Japanese carmakers are urging their governments for help, and Taiwan and TSMC are being asked to intervene. Chancellor Angela Merkel and President Emmanuel Macron discussed the potential for shortages last year and agreed on the need to accelerate Europe’s push to develop its own. according to a French official with knowledge of the case.
Waffles manufactured by TSMC. Taiwan represents a choking point in the global semiconductor supply chain.
Source: Taiwan Semiconductor Manufacturing Co.
The car industry’s pleas illustrate how TSMC’s chip manufacturing skills have provided political and economic leverage in Taiwan in a world where technology is being used in the great power struggle between the US and China – which is probably not under the government of Joe Biden will not be.
Taiwan’s grip on the semiconductor industry, despite being constantly threatened by Beijing, is also a choking point in the global supply chain, giving new urgency to plans from Tokyo to Washington and Beijing to increase independence.
Jan-Peter Kleinhans, director of the technology and geopolitical project at the Berlin think tank, was produced by the US-developed model for making chips, the biggest critical point of failure in the entire semiconductor value chain. Stiftung Neue Verantwortung.
Choke industry choking points
The largest companies in the industry are stretched out in only a few countries
Source: Bloomberg data
The Trump administration took advantage of that bottleneck to deny Beijing access to technology. By banning access to all U.S. chip technology, including design, it could break down the supply of semiconductors from TSMC and other foundries to Huawei Technologies, hampering the advancement of China’s largest technology company.
It also negotiated with TSMC to establish a $ 12 billion plant in Arizona. South Korea’s Samsung Electronics Co. will follow, with a $ 10 billion facility in Austin, Texas.
The ‘CHIPS for America Act’ introduced to Congress last year aims to encourage more plants to settle in the US. Michael McCaul, a Republican from Texas, plans to reinstate the two-party bill with the goal of securing $ 25 billion in federal funds and taxes. incentives. McCaul said in a statement that he was working with colleagues in the House and Senate “to get the priority of signing the remaining provisions of CHIPS to the law as soon as possible.”
The news that Intel Corp., the former industry leader, is considering outsourcing the production of some chips to TSMC under its former CEO, underscores the need for an American player who can manufacture at the forefront, a member of the staff member of the Foreign Affairs Committee said. not authorized to speak in public.
The European Union aims to strengthen the bloc’s technological sovereignty ‘through an alliance initially armed with as much as 30 billion euros ($ 36 billion) in public-private investment to increase Europe’s share of the global disk market to 20% increase (without a target date)) of less than 10% now.
The ASML Holding NV website in Veldhoven, the Netherlands. ASML has a monopoly on the machines needed to produce the best chips.
Photographer: Jasper Juinen / Bloomberg
It also encourages Taiwan to increase investment in the 27-nation bloc, with some success. GlobalWafers Co., based in TSMC’s hometown of Hsinchu, just made its acquisition for the German Siltronic AG to value the company at 4.4 billion euros, an acquisition that would earn the world’s largest silicon wafer manufacturer.
This is not to say that Taiwan is the only player in the semiconductor supply chain. The US still holds dominant positions, especially in disk design and electronic software tools; ASML Holding NV from the Netherlands has a monopoly on the machines needed to produce the best chips; Japan is a major supplier of equipment, chemicals and waffles.
But as the emphasis shifts to ever smaller, more powerful chips that require less energy, TSMC is increasingly in its own field. And that has helped Taiwan shape a comprehensive ecosystem around it: ASE Technology Holding is the world’s best chip compiler, while MediaTek has become the largest smartphone vendor for smartphones.
Semiconductor production
The industry is divided into three main areas, although companies integrate other specializations to centralize their supply chain
Tokyo is also trying to attract TSMC to set up in Japan. With 110 billion yen ($ 1 billion) earmarked for R&D investment last year and another 90 billion yen for 2021, some of it could go to a TSMC facility, according to what the company is considering setting up in Japan .
“TSMC is becoming increasingly dominant,” said Kazumi Nishikawa, an official working on technology issues at the Japanese Ministry of Economy. “This is something that everyone in the chip industry needs to find a way to tackle.”
In its five-year plan presented in October, China is channeling aid to the chip sector and other key technologies to $ 2 trillion by 2025. But even that kind of money does not negate the need for Taiwan. Indeed, China has long tapped the island for talent for making chips; two key executives at China’s leading disk maker, Semiconductor Manufacturing International Corp., previously worked at TSMC: co-CEO Liang Mong Song and vice president Chiang Shang-yi.
But with Washington promoting China’s progress, it is also speculated that Beijing may steal the use of chip IP, with Taiwan as the core of these efforts.
Taiwanese cybersecurity firm TeamT5 has observed a gradual increase in attacks on the island’s chip industry, in line with the tightening of US export controls over China. While it is not always possible to know if these are Chinese state actors, “they are all attacking the Taiwanese semiconductor industry,” said Shui Lee, an analyst at the T5 cyber threat.
Colleague analyst Linda Kuo said the Taiwanese government was concerned about a ransom attack on TSMC in 2018 and announced plans for about $ 500 million to make the industry more aware of cyber security issues.
Inside TSMC’s 12-inch wafer factory. Taiwanese cybersecurity firm TeamT5 has observed a gradual increase in attacks on the island’s chip industry, in line with the tightening of US export controls over China.
Source: Taiwan Semiconductor Manufacturing Co.
The bigger concern is that TSMC’s chip factories could inflict collateral damage if China compensates for threats to invade Taiwan if it moves to independence.
TSMC’s capital expenditure of as much as $ 28 billion for this year indicates that it will stay ahead.
“Taiwan is the focus of Chinese security policy,” said Mathieu Duchatel, director of the Asia program at the Montaigne Institute in Paris. While Taiwan’s status in the global chip supply chain is a ‘major strategic value’, it is also a powerful reason for Beijing to stay away, said Duchatel, who has just published a policy document on China’s pursuit of semiconductors.
The assumption that the Taiwanese forces would be overwhelmed during an invasion, ‘there is no reason why they should leave these facilities intact,’ he said. And maintaining the world’s most advanced factories “is in the interest of all.”
Peter Wennink, CEO of ASML, told Bloomberg TV. “If you want to allocate the building capacity of the semiconductor, the manufacturing capacity, you have to think about years,” he said.
Meanwhile, geopolitics means that a shortage of chips could become a more frequent occurrence, according to Joerg Wuttke, president of the EU Chamber of Commerce in China.
“It’s going to move to the point that, as a result of government intervention, there will be sudden disruptions in the supply chain, not just because of capacity issues,” he told Bloomberg Television. “So be better prepared.”
– With the help of Natalia Drozdiak, Debby Wu, Ellen Proper, Birgit Jennen, Francine Lacqua, Matthew Miller and Gem Atkinson