Unless timely action is taken, the world will experience a "silicon crisis" in the next few years, creating chaos in international weapons technology and imbalances in global high-tech industries.
At a semiconductor industry seminar last Monday, US Deputy Under Secretary of Defense for Technology Security Policy and Counterproliferation Lisa Bronson said the US does not want semiconductor technology to flow from Taiwan to China, because of Beijing's military ambitions. She said the US and Taiwan should cooperate to guarantee that they maintain a national-defense advantage. She stressed the importance of controlling semiconductor technology exports to China and said that to safeguard national security and economic interests, US and Taiwanese semiconductor industries must maintain their lead over their rivals in China.
Because some chips can be put to military use, the US is worried that China has improved its semiconductor research and development abilities, thereby improving its military capabilities. The US uses export restrictions to minimize the impact of technological transfers on its national security. Taiwan should cooperate closely with Japan, the US, South Korea and the EU in taking concerted action to similarly restrict exports.
The transfer of Taiwan's semiconductor technology has also impacted the nation's industrial landscape. Taiwan Semiconductor Manufacturing Corp chairman Morris Chang has pointed out that the industry's focus is shifting towards China.
Given the rapid expansion of China's semiconductor industry, the global semiconductor industry may experience excess supply in 2005, which could trigger a collapse in prices and a recession. The industry goes through a recession almost every five years. This relatively short cycle is a result of continuing growth in the industry, which has moved its base from the US to Japan, South Korea, Taiwan and now to China.
Chinese manufacturers such as Semiconductor Manufacturing International Corp and Grace Semiconductor Manufacturing Corp are making large-scale investments to expand their foundries. They are rivals that Taiwanese companies and venture capitalists created by introducing technology and money to China. Without such input China's semiconductor industry would still be in its infancy.
Under intense pressure from the industry, the government last year announced that Taiwanese businesses would be allowed to invest in 8-inch wafer manufacturing in China. The production value of Taiwan's semiconductor industry was estimated at NT$714.4 billion in 2000, accounting for 7.39 percent of GDP that year. The production value of Taiwan's chip manufacturing today accounts for 76.8 percent of world production and is the country's most internationally competitive strategic industry. Why should we be willing to finance China's expansion over our own market share?
Investment in China's semiconductor industry not only boosts China's economy, it helps the Peoples' Liberation Army (PLA) advance as well, which endangers Taiwan's security. The government should bring a halt to its policy of allowing Taiwanese to set up 8-inch fabs in China. Taiwan's high-tech firms should be barred from moving design centers or design information to China. We don't want to see a global "silicon crisis" -- or a high-tech PLA.
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