As China pushes the world to avoid official dealings with Taiwan, leaders across the globe are realizing just how dependent they have become on the democratic nation.
Taiwan is being courted for its capacity to make leading-edge computer chips. That is mostly down to Taiwan Semiconductor Manufacturing Co, the world’s largest foundry and go-to producer of chips for Apple Inc smartphones, artificial intelligence and high-performance computing.
Taiwan’s role in the world economy largely existed below the radar, until it came to recent prominence as the auto industry suffered shortfalls in chips used for everything from parking sensors to reducing emissions. With automakers — including Germany’s Volkswagen AG, the US’ Ford Motor Co and Japan’s Toyota Motor Corp — forced to halt production and idle plants, Taiwan’s importance has suddenly become too big to ignore.
US, European and Japanese automakers are lobbying their governments for help, with Taiwan and TSMC being asked to step in.
German Chancellor Angela Merkel and French President Emmanuel Macron discussed the potential for shortages last year and agreed on the need to accelerate Europe’s push to develop its own chip industry, a French official with knowledge of the matter said.
The auto industry’s pleas illustrate how TSMC’s chipmaking skills have handed Taiwan political and economic leverage in a world where technology is being enlisted in the great power rivalry between the US and China — a standoff unlikely to ease under US President Joe Biden’s administration.
CHOKE POINT
Taiwan’s grip on the semiconductor business — despite being under constant threat of invasion by Beijing — also represents a choke point in the global supply chain that is giving new urgency to plans from Tokyo to Washington and Beijing to increase self-reliance.
By dominating the model developed by the US of outsourcing chip manufacture, Taiwan “is potentially the most critical single point of failure in the entire semiconductor value chain,” said Jan-Peter Kleinhans, director of the technology and geopolitics project at Berlin-based think tank Stiftung Neue Verantwortung.
The administration of former US president Donald Trump exploited that pinch point to deny Beijing access to technology. By banning access to all US chip technology including design, it was able to cut off the supply of semiconductors from TSMC and other foundries to Huawei Technologies, hobbling the advance of China’s biggest tech company.
It also negotiated with TSMC to establish a US$12 billion chip fabrication plant in Arizona. South Korea’s Samsung Electronics Co is set to follow, with a US$10 billion facility in Austin, Texas.
The “CHIPS for America Act” introduced in the US Congress last year aims to encourage more plants to be established in the US. US Representative Michael McCaul plans to reintroduce the bipartisan bill this year with a view to securing US$25 billion in federal funds and tax incentives.
McCaul said in a statement that he is working with colleagues in the US House of Representatives and Senate “to prioritize getting the remaining provisions of CHIPS signed into law as quickly as possible.”
News that Intel Corp, the onetime industry leader, was considering outsourcing production of some chips to TSMC under its former CEO underscored the need for a US player that can fabricate at the leading edge, said a member of the House Committee on Foreign Affairs staff who is not authorized to speak publicly.
The EU aims to bolster the bloc’s “technological sovereignty” through an alliance armed initially with as much as 30 billion euros (US$36.4 billion) of public-private investment to raise Europe’s share of the global chip market to 20 percent (without a target date) from less than 10 percent.
It is also encouraging Taiwan to increase investments in the 27-nation bloc, with some success. GlobalWafers Co, based in TSMC’s hometown of Hsinchu, just boosted its offer for Germany’s Siltronic AG to value the company at 4.4 billion euros, an acquisition that would create the world’s largest silicon wafer maker by revenue.
That is not to say Taiwan is the only player in the semiconductor supply chain. The US still holds dominant positions, notably in chip design and electronic software tools; ASML Holding NV of the Netherlands has a monopoly on the machines needed to fabricate the best chips; Japan is a key supplier of equipment, chemicals and wafers.
However, as the emphasis shifts to ever smaller, more powerful chips that require less energy, TSMC is increasingly in a field of its own. Moreover, it has helped Taiwan form a comprehensive ecosystem around it: ASE Technology Holding is the world’s top chip assembler, while MediaTek has become the largest smartphone chipset designer.
Tokyo is also wooing TSMC to set up in Japan. With ￥110 billion (US$1.06 billion) earmarked last year for research and development, and another ￥90 billion for this year, some of that might go to a TSMC facility, which reports have said the company is considering setting up in Japan.
“TSMC is becoming more and more dominant,” said Kazumi Nishikawa, an official working on technology issues at the Japanese Ministry of Economy, Trade and Industry. “This is something everybody in the chip industry must find a way to deal with.”
CYBERTHREAT
China, in its five-year plan presented in October last year, is channeling help to the chip industry and other key technologies to the tune of US$1.4 trillion through 2025. Yet even that kind of money does not negate the need for Taiwan.
Indeed, China has long tapped Taiwan for chipmaking talent; two key executives at China’s top chipmaker, Semiconductor Manufacturing International Corp, used to work at TSMC: co-CEO Liang Mong-song (梁孟松) and vice chairman Chiang Shang-yi (蔣尚義).
However, with Washington stymieing China’s progress, there is speculation that Beijing could resort to stealing chip intellectual property, with Taiwan at the heart of those endeavors.
Taiwanese cybersecurity firm TeamT5 has observed a steady increase in attacks on the local chip industry corresponding to the tightening of US export controls on China.
While it is not always possible to know if these are Chinese state actors, “they are all attacking the Taiwanese semiconductor industry,” T5 cyberthreat analyst Shui Lee said.
Fellow analyst Linda Kuo said that the Taiwanese government was alarmed by a ransomware attack on TSMC in 2018 and had announced plans for about US$500 million to help the industry become more aware of cybersecurity issues.
The greater worry is that TSMC’s chip factories could become collateral damage if China were to make good on threats to invade Taiwan if it moves toward independence.
TSMC’s capital spending of as much as US$28 billion for this year suggests it is going to stay out in front.
“Taiwan is the center of gravity of Chinese security policy,” said Mathieu Duchatel, director of the Asia program at the Institut Montaigne in Paris.
Yet while Taiwan’s status in the global chip supply chain is a “huge strategic value,” it is also a powerful reason for Beijing to stay away, said Duchatel, who has just published a policy paper on China’s push for semiconductors.
Assuming Taiwanese forces were to be overwhelmed during an invasion, “there is no reason why they would leave these facilities intact,” he said, adding that preserving the world’s most advanced fabs “is in the interests of everyone.”
For all the moves to reel back domestic chip fabrication, it is optimistic to think the supply chain for such a complex product as semiconductors could change in short order, ASML chief executive Peter Wennink told Bloomberg TV.
“If you want to reallocate semiconductor build capacity, manufacturing capacity, you have to think in years,” he said.
In the meantime, geopolitics means chip shortages could become a more regular occurrence, EU Chamber of Commerce in China president Joerg Wuttke said.
“This is going to move on to the point where actually because of export controls, because of governmental intervention, there will be all of a sudden supply chain disruptions not just because of capacity problems,” he told Bloomberg Television. “So better get prepared.”
In 1976, the Gang of Four was ousted. The Gang of Four was a leftist political group comprising Chinese Communist Party (CCP) members: Jiang Qing (江青), its leading figure and Mao Zedong’s (毛澤東) last wife; Zhang Chunqiao (張春橋); Yao Wenyuan (姚文元); and Wang Hongwen (王洪文). The four wielded supreme power during the Cultural Revolution (1966-1976), but when Mao died, they were overthrown and charged with crimes against China in what was in essence a political coup of the right against the left. The same type of thing might be happening again as the CCP has expelled nine top generals. Rather than a
Former Chinese Nationalist Party (KMT) lawmaker Cheng Li-wun (鄭麗文) on Saturday won the party’s chairperson election with 65,122 votes, or 50.15 percent of the votes, becoming the second woman in the seat and the first to have switched allegiance from the Democratic Progressive Party (DPP) to the KMT. Cheng, running for the top KMT position for the first time, had been termed a “dark horse,” while the biggest contender was former Taipei mayor Hau Lung-bin (郝龍斌), considered by many to represent the party’s establishment elite. Hau also has substantial experience in government and in the KMT. Cheng joined the Wild Lily Student
When Taiwan High Speed Rail Corp (THSRC) announced the implementation of a new “quiet carriage” policy across all train cars on Sept. 22, I — a classroom teacher who frequently takes the high-speed rail — was filled with anticipation. The days of passengers videoconferencing as if there were no one else on the train, playing videos at full volume or speaking loudly without regard for others finally seemed numbered. However, this battle for silence was lost after less than one month. Faced with emotional guilt from infants and anxious parents, THSRC caved and retreated. However, official high-speed rail data have long
Taipei stands as one of the safest capital cities the world. Taiwan has exceptionally low crime rates — lower than many European nations — and is one of Asia’s leading democracies, respected for its rule of law and commitment to human rights. It is among the few Asian countries to have given legal effect to the International Covenant on Civil and Political Rights and the International Covenant of Social Economic and Cultural Rights. Yet Taiwan continues to uphold the death penalty. This year, the government has taken a number of regressive steps: Executions have resumed, proposals for harsher prison sentences
RSS