Taiwan chips key for global high-tech

TAIPEI: During her whirlwind tour of Taiwan, US House of Representative Speaker Nancy Pelosi was not only talking geopolitics with the Asian country’s political leaders; but also business at the island’s most-valuable firm, the Taiwan Semiconductor Manufacturing Company, also known as TSMC.

Pelosi’s meeting with TSMC chairman Mark Liu on Wednesday highlighted the outsized technological weight of the chipmaker in the global economy. From aerospace to consumer electronics, the world is massively dependent on TSMC semiconductors in virtually all sectors.

TSMC is located in the Hsinchu Science Park in northwestern Taiwan, and even the slightest disruption in the company’s production output is, for example, bound to halt assembly lines in the global auto industry, idling thousands of workers worldwide. But how did one company’s product become so indispensable? Established in 1985, the Hsinchu Science Park is divided into six satellite parks —Hsinchu, Zhunan, Tonglu, Longtan, Yilan and the Biomedical Park in Hsinchu — employing a total of about 150,000 people. Its main sector is the integrated-circuit industry, which accounts for 70% of the park’s total output value. “Taiwan’s Silicon Valley,” as the area is also called, is just about 150 kilometers (93 miles) away from mainland China. It has also successfully birthed businesses in other tech sectors such as telecommunications, optoelectronics, precision machinery and biotechnology.

Hsinchu’s 20 chipmakers — first and foremost TSMC and UMC — are the world’s biggest contract manufacturers of semiconductors. TSMC, for example, is the exclusive supplier of Apple’s silicon processors for iPhones and Mac PCs, as well as the manufacturing partner of other US companies like AMD, Broadcom and Qualcomm. In apparent retribution for Pelosi’s visit to the island, China on Wednesday suspended some trade with Taiwan, escalating existing tensions between Taipei and Beijing over the status of the self-governing island. Under its “One China policy,” Beijing has refused to recognise Taiwan as a sovereign nation for more than half a century. In a rare public interview, TSMC chairman Mark Liu told CNN on Monday that in a war between China and Taiwan, everyone would lose. “If you take a military force or invasion, you will render TSMC factory non-operable,” he said, adding that TSMC’s sophisticated manufacturing facility “depends on the real-time connection with the outside world,” and that “nobody can control TSMC by force.”

Many of the world’s Big Tech companies are “fabless,” meaning they have no production sites of their own. They commission TSMC and other socalled foundries to produce the chips they design. Peter Fintl, chip market analyst with consultancy Capgemini, recently told German business daily Handelsblatt that TSMC has “obtained a systemically important position” in the global market.

The semiconductor industry as a whole has loomed large over Pelosi’s visit to Taiwan. A global chip shortage as a result of the COVID-19 pandemic has delayed production of cars, TVs, and computers, as well as helping fuel global inflation. A larger conflict between China and Taiwan, where the US is likely to take a side, could cause further disruption.

During the meeting between Liu and Pelosi, the two sides discussed the recently passed Chips and Science Act in the US aimed at reshoring the semiconductor supply chain. The new legislation includes a $52 billion package to support chipmaking in the US, and TSMC will likely benefit from the program as a result of the $12 billion chip factory it’s planning to build in Arizona.