When Jung Yoon-seok was looking for an assembly partner for his artificial intelligence (AI) chip start-up, he had his pick of almost any country in Asia, including his native South Korea. Instead, the Rebellions Inc strategy chief opted for Taiwan because of what he sees as an unparalleled combination of talent, cost and speed.
“Taiwan is small, and Taipei is small, and in that small area everything moves super fast,” the 35-year-old Harvard graduate said.
Jung reached the same conclusion as thousands of businesses, executives and entrepreneurs who rely on the nation to turn their AI visions into reality. From Nvidia Corp and Microsoft Corp to OpenAI, the world’s AI frontrunners are increasingly turning to Taiwanese companies to fabricate their chips, build their servers and cool their devices.
Photo: Chiang Ying-ying, AP
That in turn has made the nation’s stock market the hottest major bourse in Asia over the past year, led by Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and Hon Hai Precision Industry Co (鴻海精密).
Some investors think the US$400 billion-plus rally is just the beginning. To the bulls, the world is witnessing the establishment of a ChatGPT-era manufacturing base concentrated in Taiwan. That would make the nation a key beneficiary of the AI boom — and a critical determinant of its pace and direction.
“Taiwan is really the engine that’s driving AI,” said Sean King, a senior vice president at Park Strategies and a former US Department of Commerce official.
There are risks for Taiwan. For the first time in decades, an entire technology production ecosystem would be centered not in China but its tiny neighbor. Growing tensions between the US and China may have dissuaded some AI companies from producing hardware in China.
Yet the rising importance of Taiwan makes it all the more alluring for Beijing, which has long described the nation as a breakaway province it would eventually reclaim.
TSMC is the foundation of this success. As its rivals Intel Corp and Samsung Electronics Co struggle, the Taiwanese company is further extending its leadership in the chip industry, manufacturing virtually all of the world’s most advanced semiconductors. It is the only place where Nvidia chief executive officer Jensen Huang (黃仁勳) can get his AI accelerators made.
The nation is now chock-full of lesser-known firms that are just as essential for global AI development. These linchpins include server maker Quanta Computer Inc (廣達), power leader Delta Electronics Inc (台達電) and Asia Vital Components Co (奇鋐科技), a pioneer in creating computer cooling systems. Collectively, Taiwanese firms are poised to play an outsized role in an AI market that is projected to reach US$1.3 trillion by 2032.
“This time around the optimism for Taiwan names will be stronger and last longer than in the past,” First Capital Management Inc (第一金證券投顧) chairman Edward Chen (陳奕光) said, citing TSMC’s central role in selecting partners for the likes of Nvidia.
“This is elevating Taiwan tech to an entirely different level,” Chen said.
In recent years, the increasingly aggressive US trade sanctions on China have forced companies to scout out alternative production locations, knocking the country out of many supply chains.
In less than two years, for example, those curbs have effectively sidelined China’s AI hardware industry. Taiwan’s exports of servers and graphics cards — the building blocks of data centers for training AI models — in the first nine months of this year were more than double China’s output, according to data collected by Bloomberg. That is a sharp reversal from previous years.
Today, the biggest cloud service operators — Microsoft, Amazon.com Inc, Meta Platforms Inc and Alphabet Inc’s Google — all use Taiwanese assemblers to fill their server farms as they seek to outdo OpenAI’s ChatGPT. Global spending on AI systems and services is expected to more than double to US$632 billion by 2028, according to the research firm International Data Corp.
“Taiwan is a one-stop shop for AI-related hardware,” Taiwan Institute of Economic Research researcher Arisa Liu (劉佩真) said.
JITTERS: Nexperia has a 20 percent market share for chips powering simpler features such as window controls, and changing supply chains could take years European carmakers are looking into ways to scratch components made with parts from China, spooked by deepening geopolitical spats playing out through chipmaker Nexperia BV and Beijing’s export controls on rare earths. To protect operations from trade ructions, several automakers are pushing major suppliers to find permanent alternatives to Chinese semiconductors, people familiar with the matter said. The industry is considering broader changes to its supply chain to adapt to shifting geopolitics, Europe’s main suppliers lobby CLEPA head Matthias Zink said. “We had some indications already — questions like: ‘How can you supply me without this dependency on China?’” Zink, who also
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) received about NT$147 billion (US$4.71 billion) in subsidies from the US, Japanese, German and Chinese governments over the past two years for its global expansion. Financial data compiled by the world’s largest contract chipmaker showed the company secured NT$4.77 billion in subsidies from the governments in the third quarter, bringing the total for the first three quarters of the year to about NT$71.9 billion. Along with the NT$75.16 billion in financial aid TSMC received last year, the chipmaker obtained NT$147 billion in subsidies in almost two years, the data showed. The subsidies received by its subsidiaries —
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