As the world woos TSMC, Taiwan fears losing its ‘silicon shield’

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Semiconductor giant TSMC was feted this week by US President Joe Biden and Apple CEO Tim Cook at a ceremony to unveil its $40 billion manufacturing site in Arizona – a huge investment designed to help secure America’s supply of the most advanced chips.

But back in Taiwan, there is deep unease at the growing political and commercial pressure on the world’s biggest chipmaker to expand internationally. The company is building a factory in Japan and plans to invest in Europe.

“They are like the Hope Diamond of semiconductors. Everybody wants it,” said G. Dan Hutcheson, vice president of chip research organization TechInsights. (The Hope Diamond is the largest blue diamond in the world, now residing in the National Museum of Natural History at the Smithsonian Institute in Washington.)

“Clients in China want them to build there. Customers in the United States want them there. And customers in Europe want them there too,” he added.

Aside from the risk that TSMC will take its most advanced technology with it – depriving Taiwan of one of its unique assets and reducing employment opportunities locally – there are fears that a reduced presence of the company could expose Taipei to a greater pressure from Beijing, which has vowed to take control of the autonomous island, by force if necessary.

TSMC is considered a national treasure in Taiwan and supplies tech giants like Apple (AAPL) and Qualcomm (QCOM). It is mass-producing the world’s most advanced semiconductors, components essential to the smooth operation of everything from smartphones to washing machines.

The company is perceived to be so valuable to the global economy, as well as to China – which claims Taiwan as its own territory although it has never controlled it – that it is sometimes even considered part of it. a “silicon shield” against a possible military invasion by Beijing. TSMC’s presence provides a strong incentive for the West to defend Taiwan against any attempt by China to take it by force.

“The idea is that if Taiwan were to become a powerhouse in semiconductors, then America should support and defend it,” Hutcheson said. “The strategy was super successful.”

A day before Tuesday’s Phoenix ceremony, opposition Taiwan People’s Party lawmaker Chiu Chenyuan asked Foreign Minister Joseph Wu if there was a “secret deal” with the United States to disadvantage the Taiwanese chip industry.

Chiu claimed the chip giant was under political pressure to move its operations and most advanced technology to the United States. He cited the transfer of 300 people, including TSMC engineers, to the Arizona factory. In response, Wu said there was no secret deal and no attempt to diminish Taiwan’s importance to TSMC.

Patrick Chen, head of research at Taipei-based CL Securities Taiwan, said there is common concern on the island about TSMC’s growing international importance, the pressure it faces to expand and what this means for Taiwan.

“It’s similar to what happened in the United States in the 70s and 80s when manufacturing jobs were moved from the United States to other countries. Many local jobs were lost and cities goes bankrupt,” he said.

CNN asked TSMC for comment on its expansion plans.

Its CEO, CC Wei, previously said, “Every region is important to TSMC,” adding that it “will continue to serve all customers around the world.”

Founded in 1987 by Morris Chang, TSMC isn’t a household name outside of Taiwan, even though it produces around 90% of the world’s super-advanced computer chips.

Semiconductors are an indispensable part of almost all electronic devices. They are difficult to manufacture due to the high cost of development and the level of knowledge required, which means that much of the production is concentrated among a handful of suppliers.

Fearful of losing access to crucial chips, especially as tension has escalated between China and the United States, as well as between Beijing and Taipei, governments and big companies in contact with consumers like Apple have asked semiconductor companies to locate their operations, experts say.

“TSMC’s decision to expand its investment in Arizona is proof that politics and geopolitical risk will play a bigger role in supply chain decisions than ever before,” said Chris Miller, author of ” Chip War: the Fight for the World’s Most Critical Technology”.

“It also suggests that TSMC’s customers are asking for greater geographic diversification, which was not previously a top concern among major customers.”

On Tuesday, TSMC said it was increasing its investments in the United States by building a second semiconductor plant in Arizona and increasing its total investment from $12 billion to $40 billion.

Chang previously said his Arizona factory would produce 3-nanometer chips, the company’s most advanced technology, as advances in chipmaking require ever-smaller transistors to be etched onto silicon wafers.

These announcements worry politicians like Chiu of the Taiwan People’s Party. He worries about the loss of the island as TSMC is courted around the world.

Chen of CL Securities said national security concerns among governments around the world were driving TSMC’s expansion. But he believes the company will continue to manufacture its most advanced technology at home.

“It would make economic sense given [the] lower wages [and] better quality of Taiwanese engineers,” he said, adding that the company needed approval from Taiwan’s Ministry of Economic Affairs to move its most advanced technologies overseas, which was unlikely to happen. she grants.

Many experts believe that by the time 3-nanometer chips are manufactured in Arizona, TSMC’s Taiwanese operations will produce even smaller, more advanced chips.

Hutcheson also believes TSMC will retain its most advanced development teams in Taiwan.

“Once you have a team of people doing development work, they work closely together. You don’t want to disturb that. It’s not an easy thing to do,” he said.

– CNN’s Wayne Chang contributed to this report.


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