While Russian gas can be replaced by other forms of energy, Taiwan-made microchips cannot. The country’s chip giant, TSMC, has achieved global market dominance of truly systemic proportions. But, why?
During her quick trip to Taiwan, US House Speaker Nancy Pelosi wasn’t just talking geopolitics with the Asian country’s political leaders; but also business in the island’s most valuable company, Taiwan Semiconductor Manufacturing Company, also known as TSMC.
Pelosi’s meeting with TSMC Chairman Mark Liu on Wednesday highlighted the chipmaker’s enormous technological weight in the global economy. From aerospace to consumer electronics, the world relies heavily on TSMC semiconductors in virtually every industry.
TSMC is located in the Hsinchu Science Park in northwest Taiwan, and even the slightest disruption to the company’s production, for example, is expected to disrupt assembly lines in the global auto industry, leaving thousands of workers idle around the world.
But how did a company’s product become so indispensable?
Taiwan is home to industry-leading chip factories as well as an industrial base that supplies key components to industries.
30 years on the cutting edge of technology
Founded in 1985, the Hsinchu Science Park is divided into six satellite parks — Hsinchu, Zhunan, Tonglu, Longtan, Yilan and the Hsinchu Biomedical Park — employing a total of about 150,000 people. On the same subject : Pelosi is expected to visit Taiwan, Taiwanese and US officials said. Its main sector is the integrated circuit industry, which accounts for 70% of the park’s total production value.
“Taiwan’s Silicon Valley”, as the area is also called, is just 150 kilometers from mainland China. He has also successfully built businesses in other technology sectors such as telecommunications, optoelectronics, precision machinery and biotechnology.
Hsinchu’s 20 chipmakers — mainly TSMC and UMC — are the world’s largest semiconductor third-party manufacturers. TSMC, for example, is Apple’s exclusive supplier of silicon processors for iPhones and Mac PCs, as well as a manufacturing partner for other US companies such as AMD, Broadcom and Qualcomm.
‘Systemic foundry’ with ambitions
In apparent retribution for Pelosi’s visit to the island, China on Wednesday suspended some trade with Taiwan, heightening tensions between Taipei and Beijing over the island’s autonomous status.
Under its “One China Policy,” Beijing has refused to recognize Taiwan as a sovereign nation for more than half a century. On the same subject : United States and China: Who Changed the ‘Status Quo’ on Taiwan?.
In a rare public interview, TSMC chairman Mark Liu told CNN on Monday that in a war between China and Taiwan, everyone would lose.
“If you take a military force or invasion, you will make TSMC’s factory inoperable,” he said, adding that TSMC’s sophisticated manufacturing facility “depends on the real-time connection to the outside world” and that “no one can control TSMC by force.”
Nancy Pelosi’s visit to Taipei also raised strong pro-China sentiments among Taiwanese.
Many of the world’s big tech companies are “fableless,” meaning they don’t have production sites of their own. They contract with TSMC and other so-called foundries to produce the chips they design.
Peter Fintl, a chip market analyst at consultancy Capgemini, recently told the German business newspaper Handelsblatt that TSMC “has gained a systemically important position” in the global market.
The semiconductor industry as a whole was highlighted with Pelosi’s visit to Taiwan. Global chip shortages as a result of the COVID-19 pandemic have delayed production of cars, TVs and computers, as well as helping to fuel global inflation. A larger conflict between China and Taiwan, where the US is likely to take a side, could cause further disruption.
Global race for chipmaking dominance
During the meeting between Liu and Pelosi, the two sides discussed the recently passed US Chip and Science Act, aimed at reorienting the semiconductor supply chain. The new legislation includes a $52 billion (€51. See the article : Indonesia leader targets food crisis during Russia-Ukraine peace mission.1 billion) package to support chip manufacturing in the US, and TSMC will likely benefit from the program as a result of the $12 billion chip factory it plans to build in the US. Arizona.
The factory will not be the company’s first on American soil. TSMC has already installed silicon wafer production on the US west coast and a chip research and design center in Texas. Washington stressed, however, that subsidies will only flow if manufacturers are ensuring that sensitive chip technology does not end up in China’s hands.
Alexander Görlach, a China expert at Oxford University, said that probably no other country in the world is doing more to pursue technological dominance than China.
“China has a keen interest in gaining access to Taiwanese chip manufacturing know-how because it would perfectly match China’s vast deposits of rare earth minerals,” he recently told German TV station Welt recently.
“That’s why countries like Germany and the United States shouldn’t sit idly by when the People’s Republic tries to take over Taiwan. No car would roll off the assembly lines if Taiwan fails to deliver its microchips.”
Meanwhile, the European Union is also working on legislation that seeks to strengthen the continent’s chip-making industry. Its European Chip Act will include subsidies worth €43 billion aimed at increasing European chip production from currently 10% of the global market to 20% by 2030.
EU subsidies have lured chipmaker Intel to the eastern German city of Magdeburg, where it wants to build a factory.
For the foreseeable future, however, Taiwan will remain the world’s largest chip manufacturing location, covering about 90% of the world’s high-end semiconductor demand, according to recent data published by the US Semiconductor Industry lobby group. Association.
When CNN asked TSMC chairman Mark Liu why China is still not capable of producing high-quality chips like Taiwan, he smiled and replied, “Oh, they can, but a few years later.”
This article was originally written in German.