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While Russian gas can be replaced with other forms of energy, microchips manufactured in Taiwan cannot. Domestic chip giant TSMC has achieved global dominance in a truly system-sized market. But why is that so?

During her stormy tour of Taiwan, US House of Representatives President Nancy Pelosi not only discussed geopolitics with the Asian country’s political leaders; but also operating in the island’s most valuable company, Taiwan Semiconductor Manufacturing Company, also known as TSMC.

Pelosi’s meeting with TSMC CEO Mark Liu on Wednesday highlighted the great technological importance of the chip manufacturer in the global economy. From the aerospace industry to consumer electronics, the world is heavily dependent on TSMC semiconductors in virtually all sectors.

TSMC is located in Hsinchu Science Park in northwest Taiwan, and even the slightest disruption to the company’s production will result in, for example, assembly lines stopping in the global auto industry, inactivity of thousands of employees worldwide.

But how did one company’s product become so indispensable?

Taiwan is home to industry-leading chip factories as well as an industrial base that provides key components for the industry

30 years on the cutting edge of technology

Established in 1985, Hsinchu Science Park is divided into six satellite parks – Hsinchu, Zhunan, Tonglu, Longtan, Yilan and Hsinchu Biomedical Park – employing a total of approximately 150,000 people. This may interest you : Xinhua Commentary: The politically motivated report betrays scientific principles. Its main sector is the integrated circuit industry, which accounts for 70% of the park’s total production value.

“Taiwan’s Silicon Valley,” as this area is called, is only about 150 kilometers (93 miles) from mainland China. She has also successfully established companies in other technology sectors such as telecommunications, optoelectronics, precision machinery and biotechnology.

The 20 Hsinchu chip makers – primarily TSMC and UMC – are the world’s largest contract semiconductor manufacturers. For example, TSMC is the exclusive supplier of Apple silicon processors for iPhones and Macs, and is also a manufacturing partner of other US companies such as AMD, Broadcom, and Qualcomm.

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‘Systemic foundry’ with ambitions

In apparent revenge for Pelosi’s visit to the island, China on Wednesday suspended some trade with Taiwan, escalating existing tensions between Taipei and Beijing over the status of a self-governing island. See the article : Seven ways the war in Ukraine is changing global science.

In line with its ‘One China Policy’, Beijing has refused to recognize Taiwan as a sovereign country for more than half a century.

In a rare public interview, TSMC chairman Mark Liu told CNN on Monday that everyone would lose in the war between China and Taiwan.

“If you take the military or an invasion, you will make the TSMC factory shut down,” he said, adding that TSMC’s sophisticated manufacturing facility “depends on a real-time connection to the outside world” and that “no one can control TSMC by force. “.

Nancy Pelosi’s visit to Taipei also sparked strong pro-China sentiment among the Taiwanese

Many of the world’s Big Tech companies are “no fairy tales”, which means that they do not have their own production facilities. They commission TSMC and other so-called foundries to produce their own chips.

Peter Fintl, chip market analyst at consulting firm Capgemini, recently told German business daily Handelsblatt that TSMC has “acquired a systemically important position” in the global market.

The semiconductor industry as a whole was of great importance with Pelosi’s visit to Taiwan. The global chip shortage as a result of the COVID-19 pandemic has delayed the production of cars, televisions and computers, as well as contributing to an increase in global inflation. The greater conflict between China and Taiwan, in which the US is likely to side with it, could cause further disruption.

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Global race for chipmaking dominance

During the meeting between Liu and Pelosi, both sides discussed the recently passed US Chips and Science Act to restore the semiconductor supply chain. The new rules include a $ 52 billion (€ 51. On the same subject : The Asia-Pacific travel industry will not fully recover without China, the analyst said.1 billion) package to support US chip manufacturing, and TSMC is likely to benefit from the program as a result of the $ 12 billion chip factory it plans to build in Arizona.

The factory will not be the first company on American soil. TSMC has already launched silicon wafer production on the US West Coast and an integrated circuit design and research center in Texas. Washington stressed, however, that the subsidies would only flow if manufacturers were sure that the sensitive chip technology did not end up in China’s hands.

Alexander Görlach, a China expert at the University of Oxford, said that probably no other country in the world is doing more to achieve technological dominance than China.

“China is very interested in gaining access to Taiwanese chip manufacturing know-how as it would fit perfectly with China’s own massive rare earth mineral deposits,” Welt recently told German private TV station Welt.

“That is why countries like Germany and the USA cannot stand by when the People’s Republic of China tries to take over Taiwan. No car will ever roll off the assembly lines if Taiwan stops supplying its microchips. “

Meanwhile, the European Union is also working on legislation to strengthen the chip industry on the continent. Its European Chips Act will include grants of € 43 billion to boost European chip production from the current 10% of the global market to 20% by 2030.

EU subsidies have attracted Intel’s chip maker to Magdeburg in eastern Germany, where it wants to build a factory

However, for the foreseeable future, Taiwan will remain the world’s largest chip manufacturing location, covering approximately 90% of the world’s high-end semiconductor demand, according to recent figures released by the US Semiconductor Industry Association lobbying group.

When CNN asked TSMC CEO Mark Liu why China is still unable to produce high-quality chips like Taiwan, he smiled and replied, “Oh, they can, but a few years later.”

This article was originally written in German.

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