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


Taipei, Taiwan
CNN Business

Taiwan plays a crucial role in ensuring the world gets its cutting-edge technological devices, from laptops to advanced weapons, on time. That’s because the self-governing democratic island of 24 million people is a world leader in the supply of semiconductor chips.

But as tensions escalate between Taipei and Beijing, the fate of this industry has become a global concern. Experts have warned that any disruption in Taiwan’s chip supply could cripple production of key equipment, affecting nearly everyone in the world.

The island has faced increasing military aggression from China in recent months. In response, Taiwan has stepped up its own military training and committed a record amount of defense spending this year.

Advanced Taiwan-made chips are an indispensable part of everything from smartphones to washing machines.

If a conflict were to occur in the Taiwan Strait, “it would be disastrous not only for Taiwan, not only for China, but also for the United States, the EU and everyone else,” said Roy Lee, director deputy executive of Chung-Taiwan. hua institute for economic research.

The chaos in global auto manufacturing triggered by a pandemic-related chip shortage over the past year gives some idea of ​​the seriousness of the situation.

“With the shortage of cars, you now have to wait six months for cars made in Europe,” he added. “If Taiwan has stopped supplying chips for other products, you’ll probably have to wait more than 12 months for a new cellphone, or even longer for a laptop. »

One Taiwanese company in particular – Taiwan Semiconductor Manufacturing Company (TSMC) – is the world’s largest contract manufacturer of chips and plays a vital role in powering products made by tech companies like Apple, Qualcomm and Nvidia.

With a market cap of nearly $500 billion, TSMC is one of Asia’s most valuable companies and accounts for 90% of the world’s super-advanced chips, Reuters said in a recent report citing industry estimates. .

The company – widely dubbed in Taiwan its “sacred mountain” – is so important to the island that its employees can ask to be exempted from military reservist training – even if they are asked, the Ministry of Defense said. .

The company did not respond to a request for comment from CNN Business.

Super-advanced semiconductor chips – like those produced by TSMC – are difficult to manufacture due to the high cost of development and the level of knowledge required, which means that much of the production is concentrated at a handful of suppliers. .

The global semiconductor industry is already under pressure due to a growing supply shortage, with many tech companies reporting delays in securing chips for their production operations. This makes Taiwan even more important, especially as the United States and China engage in a bitter rivalry to develop the advanced technologies of the future, such as artificial intelligence and 5G.

Should Taiwan fall to Communist authorities in Beijing, Western nations could potentially lose access to the island’s valuable semiconductor chips.

Russia’s invasion of Ukraine has heightened concerns that China may increase its military strength against Taiwan. The communist leadership in Beijing has long claimed the island as part of its territory, although it has never ruled there.

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

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

“Taiwan and Ukraine are fundamentally different in terms of geopolitics, geography and importance to international supply chains,” President Tsai Ing-wen said in condemning Russia’s invasion of Ukraine last month. .

Last month, Taiwan announced that it had begun imposing economic sanctions against Russia. Authorities said major Taiwanese chipmakers, which account for more than half of the world’s semiconductor chip production, have all pledged to comply with the ruling.

Asked about the differences between Taiwan and Ukraine, J. Michael Cole, a Taipei-based senior fellow at the Global Taiwan Institute, said the island’s indispensable role in global supply chains “is changing the way countries – the international community – will calculate their response to the threat or invasion of Taiwan.

China’s Taiwan Affairs Office did not respond to a request for comment.

While Taiwan’s role as a leading semiconductor hub may be indispensable to the world right now, experts say the island faces challenges to maintain its edge.

The global chip supply shortage has already prompted many countries to take steps to break their dependence on Taiwan.

Last week, the US Senate passed a $52 billion plan to invest in research, design and manufacturing of semiconductor chips in the United States.

China’s biggest chipmaker, Semiconductor Manufacturing International Corp (SMIC), has pledged to invest $5 billion in additional capacity this year.

“Right now, China, the United States, and the European Union are all pursuing so-called next-generation semiconductor technologies,” Lee said.

“We understand that challenges come and we must maintain our leadership in semiconductors through research and development, and most importantly, cultivate skilled talent that supports Taiwan’s success,” he added.

In response to the challenges, Taiwan recently committed $300 million to chip-focused graduate programs to train the next generation of semiconductor engineers. Last month, it also passed new legislation that requires people working in key tech roles to seek permission from authorities before traveling to mainland China.

As talk of Taiwan’s future grows, Lee believes the best way to ensure the island’s security is to fuel a combination of military and economic power.

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

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

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