Because Tsmc and Taiwan are at the center of the US-China tech war
Taiwanese semiconductor manufacturers, and in particular Tsmc, found themselves in the midst of the great geopolitical games. The Le Monde article
The announcement published in February by the number one semiconductor company in the world, the Taiwanese TSMC, made industry experts smile: the most important company in Asia was looking for a doctoral student able to analyze "the geopolitical and economic changes that could influence the supply chain ". A small revolution for a company more at ease in the shadow of its prestigious customers, Qualcomm or Apple, than at the center of the international political arena.
Jealous of its industrial secrets – writes the Le Monde correspondent – the company rarely opens its doors to journalists and its managers avoid interviews. In recent years, however, geopolitics has caught up with it: on August 3, during her controversial visit to Taiwan, Nancy Pelosi, President of the United States House of Representatives, found time to meet Mark Liu, head of TSMC. In the days that followed, as China held military exercises around Taiwan, analysts worried as much about global supply chains as it was about the fate of the island's 24 million inhabitants, over which China claims sovereignty.
And for good reason, TSMC produces 90% of the most advanced chips in the world: the ones that make the latest iPhones the most powerful, the data centers that manage the world's computing, and the supercomputers that solve increasingly complex problems. As China intensifies military and economic pressures on the island, Taiwanese President Tsai Ing-wen has called TSMC the "sacred mountain that protects the nation".
Bulky state
A cumbersome status, some say: While the US has promised to defend Taiwan in the event of a Chinese invasion, US pressure to technologically isolate China is increasingly costing Taiwanese industry. Despite the island's diversification efforts, China remains Taiwan's largest trading partner, receiving, along with Hong Kong, 42% of Taiwanese exports in 2021, 55% of which are electronic chips, valued at $ 104 billion (€ 107 billion), according to the Taiwanese Ministry of Finance.
On October 7, the United States announced the largest sanctions ever imposed on Chinese semiconductor companies, requiring any Chinese entity to obtain a license from the US Department of Commerce under a presumption of refusal. Following this announcement, TSMC's share price fell more than 8%. UMC, another Taiwanese chip maker, was down 4.7%, while MediaTek, Taiwan's leading chip designer, was down 9%. Analysis firm Bernstein estimates that TSMC could lose between 0.4% and 5% of its revenue in 2023.
To date, the only TSMC plant operating outside of Taiwan is Nanjing, northwest of Shanghai, China. The others are all in Taiwan: a new factory has opened in Tainan and another is under construction in Kaohsiung, in the south of the island, but the bulk of TSMC's production is still in Hsinchu, the heart of global electronics. Thirty minutes by high-speed train southwest of the capital Taipei, the city, with its two engineering universities, was chosen in the 1980s to become Taiwan's “Silicon Valley”.
Walking along the avenues of the Science Park, you come across the Industrial Technology Research Institute (ITRI), a state research center from which UMC and TSMC were born: the two samples are facing each other, not far from MediaTek, GlobalWafers, which supplies TSMC with its raw materials, and ASML, the Dutch company that produces chip machines. You can also see the signs of their customers: Qualcomm, Broadcom and especially Apple, which accounts for about 25% of TSMC's revenue.
Expatriation under pressure
It is this ecosystem, enriched by hundreds of specialized SMEs, that is the strength of the Taiwanese industry. And TSMC will have to learn to do without it by building new factories away from home, under pressure from Taiwan's allies, worried that the global electronics industry is too dependent on this China-threatened territory. Two sites are under construction: an optical plant in Japan, in collaboration with Sony, and a processing plant in the United States, in the state of Arizona.
The company yielded to the insistence of the Americans, who were ready to invite TSMC to benefit from a portion of the $ 52 billion under the Chips and Science Act signed in August by US President Joe Biden. According to several sources, TSMC does not expect to make a profit in the United States, as the human and material costs are so high for the manufacturer, who is used to playing at home. But the US has made it a matter of national security, as the US Army's F-35 fighters and hypersonic missiles include chips made by TSMC.
“It's hard to believe that Taiwan wants to see its flagship company start,” says Pascal Viaud, consultant and president of the semiconductor section of the France-Taiwan Chamber of Commerce and Industry. For the time being, the company reserves its most advanced chips for domestic factories. However, the Taiwanese have understood that the technological prowess of its electronics leaders gives them a voice. Taiwan, officially called the Republic of China, lost its seat in the United Nations to Communist China in 1971 and is now recognized by only a handful of states.
But the leaders of the island were recently invited by the United States to join the Chip 4 alliance along with Washington, Japan and South Korea. "I believe the leaders of Taiwan support this alliance because they see it as an opportunity to participate in cooperation. international between states ”, says Wu Jieh-min, political scientist at the Sinica Academy of Taipei. "Some will see it as an opportunity to improve Taiwan's economic security and visibility beyond an industrial perspective."
"Nobody can control TSMC by force"
On the Chinese side, US sanctions, which reveal Chinese technological vulnerabilities, cause frustration and craving for Taiwan's electronic capabilities, a territory that President Xi Jinping has promised to "reunify" "using force" if necessary. Some, including leading economists, propose invading the island to take over TSMC if the US steps up sanctions.
Mark Liu responds to this threat. “Nobody can control TSMC by force. If you use force or invasion, you make TSMC unusable, because it's such a sophisticated production site that it depends on real-time connection with the outside world, ”he defended in a rare interview with CNN on July 31st. "If they need us, that's not a bad thing: our interruption would create great economic turbulence on both sides."
This embodies the idea of a "silicon shield" (the material the chips are made of). “If they decide to take over Taiwan, we know they can't turn TSMC's fortunes back: at best, they'll take a shell, but the company is even likely to go bankrupt,” speculates Ray Yang, ITRI's director of consulting. But China has great technological ambitions, it wants to dominate artificial intelligence, technology and scientific research. Without TSMC, they would have to scale back all their ambitions. “They need TSMC. All countries need TSMC, ”says the researcher with a smile.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/mondo/tsmc-guerra-tecnologica-stati-uniti-cina/ on Sun, 30 Oct 2022 06:56:58 +0000.