Spotlight on Taiwan and TSMC’s role in global tech amid tensions with Beijing

But as tensions rise between Taipei and Beijing, the fate of this industry has become a global issue. Experts warn that any disruption in the supply of chips to Taiwan could paralyze the production of key equipment, affecting almost everyone in the world.
In recent months, the island has faced increasing military aggression from China. In response, Taiwan stepped up its own military trainingand this year made a record amount of defense spending.

The advanced chips Taiwan makes are an integral part of everything from smartphones to washing machines.

If there is a conflict in the Taiwan Strait, “it would be disastrous not only for Taiwan, not only for China, but for the US, the EU and everyone else,” said Roy Lee, deputy chief executive of Chung Taiwan. Hua Economic Research Institute.

The chaos in the global auto industry, caused by a shortage of chips due to the pandemic last year, gives an idea of ​​how bad things can get.

“Because of the shortage of cars, European-made cars now have to wait for six months,” he added. “If Taiwan stops supplying chips for other products, then you will probably have to wait more than 12 months for a new mobile phone, or even longer for a laptop.”

Taiwan’s “sacred mountain”

One Taiwanese company in particular, Taiwan Semiconductor Manufacturing Company (TSMC), is the world’s largest contract chip manufacturer and plays a critical role in providing products developed by technology companies such as Apple, Qualcomm and Nvidia.

With a market capitalization of nearly $500 billion, TSMC is one of the most valuable companies in Asia, accounting for 90% of the world’s cutting-edge chips. Reuters according to a recent report citing industry estimates.
The firm, widely referred to as the “sacred mountain” in Taiwan, is so important to the island that its employees can apply for tax exemptions. training of military reservists – even if they are called up, the Ministry of Defense said.

The company did not respond to CNN Business’s request for comment.

Cutting-edge semiconductor chips like those made by TSMC are difficult to manufacture due to high development costs and the level of expertise required, meaning that most production is concentrated in just a few suppliers.

The global semiconductor industry is already under pressure due to a growing supply shortage with many technology companies. delay messages in providing chips for its manufacturing activities. This makes Taiwan even more important, especially as the US and China compete fiercely to develop advanced future technologies such as artificial intelligence and 5G.

If Taiwan falls to communist authorities in Beijing, Western countries could potentially lose access to the island’s valuable semiconductor chips.

Growing concerns

Russia’s invasion of Ukraine has heightened concerns about the risk that China could increase its military force against Taiwan. The communist leadership in Beijing had long since claimed the island as part of their territory, despite never having ruled over it.

China has stepped up its military pressure on Taiwan in recent months, including sending a record number of warplanes near it last October. Chinese President Xi Jinping refused to rule out the use of force to achieve what he called “national reunification.”

But as comparisons are made between Kiev and Taipei, the Taiwanese government has repeatedly stressed the strategic role of its semiconductor industry.

“Taiwan and Ukraine are fundamentally different in geopolitical, geographic and important respect for international supply chains,” said President Tsai Ing-wen, denouncing Russia’s invasion of Ukraine last month.

Taiwan announced last month that it had begun imposing economic sanctions on Russia. The authorities said major Taiwanese chip makers, which account for more than half of the world’s semiconductor chip production, have pledged to comply with the move.

Asked about the differences between Taiwan and Ukraine, J. Michael Cole, Senior Fellow at the Global Taiwan Institute in Taipei, said the island’s indispensable role in global supply chains “changes how countries – the international community – will design their response to a threat or an invasion against Taiwan.”

The Taiwan Affairs Office of China did not respond to a request for comment.

Problems ahead

While Taiwan’s role as a leading semiconductor powerhouse may be indispensable to the entire world right now, experts believe the island has trouble maintaining its edge.

The global chip shortage has already prompted many countries to take steps to get rid of their dependence on Taiwan.

Last week, the US Senate passed $52 billion plans to invest in research, design and manufacturing of semiconductor chips in the US.
China’s largest chipmaker Semiconductor Manufacturing International Corp (SMIC) committed to invest $5 billion this year for additional capacity.

“Right now, China, the US and the European Union are developing so-called next-generation semiconductor technologies,” Li said.

“We understand that challenges are coming and we need to maintain our semiconductor leadership through research and development and, most importantly, the development of a skilled workforce that supports Taiwan’s success,” he added.

In response to challenges, Taiwan recently committed $300 million to IC-focused graduate programs to train the next generation of semiconductor engineers. Last month also passed a new legislation this requires those working in key technical positions to obtain permission from the authorities before visiting mainland China.

As discussions about Taiwan’s future escalate, Li believes the best way to secure the island is through a combination of military and economic power.

“This strength comes not only from military power, but also from economic power.”

– Will Ripley and Wayne Chang reporting from Taipei, Taiwan.

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