On Sept. 21, 1999, a devastating earthquake in Taiwan caused a blackout nationwide, forcing silicon-wafer foundries in the Hsinchu Science-based Industrial Park (新竹科學工業園區) to halt production. The global supply chain was taken by surprise and high-tech shares in New York nosedived as a result. The earthquake unexpectedly made Taiwanese aware of Taiwan's importance in the world economy.
Statistics show that one-fifth of global information technology (IT) products are wholly or partially manufactured in Taiwan, according to Craig Addison in Silicon Shield: Taiwan's Protection Against Chinese Attack. One-third of all chips are also produced in Taiwan. Since these are "strategic components," security across the Taiwan Strait will be important and the US will find it difficult to give up Taiwan as long as the US computer industry is dependent on Taiwan's original equipment manufacturing (OEM). This is a guarantee for Taiwan and the origin of the "silicon shield" theory.
Deplorably, Taiwan's secret weapon, the silicon shield, is now being handed over to China by Taiwanese businesses. Chinese leaders have sensed the power of Taiwan's production capacity, the importance of which has surpassed Middle Eastern oil in recent years. Silicon products have become fundamental materials indispensable for advanced countries. How to disarm Taiwan's industry has become part of Beijing's grand strategy, as well as the main reason behind China's all-out efforts to lure Taiwan's high-tech industry during the past few years.
China's efforts to attract Taiwanese investment have indeed yielded results. Taiwan's China-bound investments, totalling billions of US dollars a year, have made China the world's third biggest producer of IT products, after the US and Japan. Taiwan has fallen far behind China in terms of output value. Although 70 percent of China's IT products are manufactured by Taiwanese companies, it is an indisputable fact that the equipment and technology has been moved across the Strait because those companies are China-based.
China's ultimate goal is the silicon wafer fabs. For the past two-and-a-half years, Beijing has mobilized the kinsmen of China's high-ranking officials to win over Taiwanese businesspeople and enlist Taiwan's wafer management and technical talent. Beijing also intends to make use of the wafer fever to unnerve Western companies into participation. The laissez-faire attitude of Taiwan's government has also aided China's tactics. Despite prohibition and penalties stipulated in law, many cases have been left unsettled for "lack of concrete evidence."
This issue cannot be simply passed off as an irreversible trend because it is unimaginable that no concrete evidence has been found over the past decade regarding the tens of thousands of cases of illegal investments in China. Now the Taiwanese-led, illegally invested wafer fabs in China have finally started operation. They are also snatching orders from Taiwan in cutthroat price competition. Is there really nothing the government can do about them? If that is the case, it is most unfair to law-abiding companies. It will also make a mockery of law and order in Taiwan.
Semiconductors are key components in IT and electronics products and are viewed as a strategic sector by advanced countries. Therefore, restrictions have been imposed on exports of technology and equipment, such as the US restrictions on the equipment for eight-inch fabs using 0.25 microns or smaller etching technology. But, despite being a US ally and relying on US military support, Taiwan has been reckless about China-bound silicon-wafer investment.