TAIPEI, Taiwan – China’s warship rehearsing a blockade of Taiwan this month, they simulated a scenario that busy global leaders and policymakers worry about: not war, but the disruption of electronic supply chains that are make the modern world work.
Taiwan’s biggest trading partners – including China, the United States, Europe and Japan – have different ideas about the self-ruled island’s political future, but they all share something in common. in a desire to expand their cutting-edge semiconductor industry.
Start with Speaker Nancy Pelosi’s Visit In early August, a series of American delegations came to kiss Taiwan’s top chip executives. There is much to achieve. In recent years, Taiwan’s largest chipmaker, Taiwan Semiconductor Manufacturing Company, or TSMC, has committed to opening new factories. in U.S.A and Japan. Taiwanese chip design company MediaTek recently partnered with Purdue University to open a chip design center.
The calculation begins with a fundamental and disturbing reality of the global economy. Taiwan is the world’s most advanced chip maker. It is also rapidly becoming one of the world’s most dangerous geopolitical flashpoints. The fear is that in the event of a conflict, companies won’t get the microchips they need to make phones and drones, set up supercomputers and mobile networks, even build new weapon.
Tech companies on both sides of the Pacific today rely heavily on TSMC to create high-performance chips that display video game graphics and power their smartphones, but also guide missiles and analyze military data over the ocean. That has made TSMC, which is little known to most consumers, an important strategic asset for both Washington and Beijing.
Amid the geopolitical landscape that has unfolded over the past month, the strength of TSMC and the rest of the island’s chip supply chain has been clear. During Ms. Pelosi’s trip to Taiwan, she met TSMC’s chief executive officer, Mark Liu, and its founder, 91-year-old Morris Chang. A separate delegation led by Senator Edward J. Markey, a Democrat of Massachusetts, met with the company to discuss investments and improve the semiconductor supply chain.
Taiwan’s president, Tsai Ing-wen, told a group that she sees the island’s technological prowess as a means to bolster support for its democracy. Calling economic security a “pillar” of national security, she said Taiwan is willing to work with partners to build a sustainable supply chain for what she calls a “democracy chip.”
China’s state media has pointed to these efforts, calling Ms Pelosi’s meeting a “photo session”. However, in an indicator of the importance of Taiwanese chips, it does not affect the company much.
Ms. Tsai and the semiconductor industry she is seeking to protect, facing all of her attacks against American delegations, face a precarious balancing act. Many Taiwanese businesses – including TSMC – rely on China for a living, even as they support Ms. Tsai in combating Beijing’s crony behavior.
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Although many in the semiconductor industry will look to the United States for support in the event of a conflict with China, they worry about the impracticality of building new factories in the United States. States, capital is more expensive and lacks supporting industries. Mr. Chang, founder of TSMC, has repeatedly and openly expressed his views.
TSMC, which declined to comment on its role in geopolitics, maneuvered in the narrow space between US and Chinese interests. It is building new production facilities in Japan and in Arizona, even as it expands the capacity of its plant in the eastern Chinese city of Nanjing. Importantly, however, much of their most cutting-edge manufacturing takes place in Taiwan, where TSMC continues to build up its leading-edge manufacturing facilities, known as fabs.
Seen one way, this web of dependencies helps keep the peace. China’s dependence on TSMC and other Taiwanese chip companies prevents the Communist Party from invading the island. The United States’ dependence on the same know-how lends credibility to its military support for Taiwan.
In the event of a military conflict, Taiwan’s importance to the global chip supply also means damage to all parties – and to the world’s digital infrastructure at large. more – will increase a lot. For no reason, the people of Taiwan call TSMC “sacred mountain, guardian of the nation”.
China’s new aggression, which grew earlier this month with a week of missile tests and fighter strikes, has gradually pushed the island’s sympathy away from China.
“They’re looking very much at the US right now,” said Dieter Ernst, a senior fellow at the International Center for Governance Innovation who studies the semiconductor industry. “But from the perspective of the Taiwanese economy and most Taiwanese companies, they need to stay connected – and hopefully as close as possible – with China.”
Several top leaders in semiconductors spoke out against China after the military exercise. Robert Tsao, founder of Taiwan’s second-largest chip maker, United Microelectronics, said he would donate $100 million to Taiwan’s military after the exercise. Tsao said in an interview that has long been considered China-friendly that things have changed.
He said of the Chinese Communist Party: “They will bring no progress, only destruction. He also spoke out against the trend of Taiwanese semiconductor engineers in recent years to work for Chinese companies with high salaries, saying they are “serving the Chinese Communist Party”.
However, few in Taiwan’s microchip industry believe that Taiwan can outstrip China. Much of the electronics supply chain continues to run through China. For many years, the value of China’s semiconductor imports has exceed the amount of oil. In 2021, it bought more than $430 billion in semiconductors, 36% of which came from Taiwan, according to Chinese state media. Much of that goes into equipment manufactured for foreign companies, which are then exported to the world.
Despite China’s efforts to produce more chips domestically – has had some success, but has also recently been hit by a wave of executive arrests for corruption – Taiwanese chipmakers have worked hard not to become an “enemy” of China, Ray Yang, consulting director at Taiwan government-funded Industrial Technology Research. Academy.
“No one can look at TSMC and say ‘you are my enemy.’ I think for Taiwan’s industry, in fact, people still know we’re their friends, even China,” he said.
However, TSMC and Taiwan are increasingly aligned with US policy. The company’s cooperation is integral to the Trump administration’s effort to thwart Huawei, the Chinese tech giant. TSMC is a major supplier to Huawei until new US regulations put an end to that.
TSMC will also receive US chip subsidies related to its commitment not to expand further in China under the recently passed Science and CHIPS Act of 2022. Taiwanese officials have accepted a new US-proposed Chip 4 alliance, which seeks to unify the US chip supply chain with Taiwan, South Korea and Japan – excluding China.
Analysts debate the degree of protection that China’s dependence on Taiwan provides. Some argue that supply chain calculations are unimportant in a decision about war, which could bring untold destruction and reshape geopolitics.
Richard J. Danzig, who served as Secretary of the Navy under President Bill Clinton, said: “You have to worry that those interdependencies look so important, in peacetime, to people engaged in those relationships. “But when the momentum for war starts to develop, it tends to take on those.”
However, a few deny that Taiwan’s central position in the supply chain makes such considerations a factor, a concept commonly referred to as a “silicon shield”. An invasion of Taiwan would mean a form of mutual annihilation, not necessarily for the world, but for many of the modern devices we use every day.
Jason Hsu, a former Taiwanese lawmaker and now a fellow at the technology-focused Harvard Kennedy School, says that brings a dose of security.
“TSMC is in the eye of the storm,” he said. “Sometimes what seems to be the most dangerous place can be the safest place.”
