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As the world courts TSMC, Taiwan worries about losing its ‘silicon shield’


Hong-Kong
CNN

Semiconductor giant TSMC was lauded 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 massive investment designed to secure the supply of America’s most advanced chips. to set.

But back home in Taiwan, there is widespread unease about growing political and commercial pressure on the world’s leading chipmaker to expand internationally. The company is building a factory in Japan and is considering investments in Europe.

They are like the Hope Diamond of semiconductors. Everyone wants them,” said G. Dan Hutcheson, vice president of TechInsights, a chip research organization. (The Hope Diamond is the world’s largest blue diamond, now in the Smithsonian Institute’s National Museum of Natural History in Washington.)

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

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

TSMC is considered a national treasure in Taiwan, supplying tech giants including Apple (AAPL) and Qualcomm (QCOM). It mass-produces the world’s most advanced semiconductors, components essential to the proper functioning of everything from smartphones to washing machines.

The company is seen as so valuable to the global economy, but also to China – which claims Taiwan as its own territory despite never having controlled it – that it is sometimes even referred to as part of a “silicon shield” against a possible military invasion by Beijing. TSMC’s presence gives the West a strong incentive to defend Taiwan against any attempt by China to take it by force.

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“The idea is that if Taiwan were to become a semiconductor powerhouse, America should support and defend it,” Hutcheson said. “The strategy has been super successful.”

A day before Tuesday’s Phoenix ceremony, Chiu Chenyuan, a legislator from the opposition Taiwan People’s Party, slammed Foreign Minister Joseph Wu about whether there is a “secret deal” with the United States to get the Taiwanese chip industry.

Chiu claimed the chip giant was under political pressure to move its operations and its most advanced technology to the US. He mentioned the transfer of 300 people, including TSMC engineers, to the Arizona plant. In response, Wu said there was no secret deal, nor had there been any attempt to reduce Taiwan’s importance to TSMC.

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

“It is similar to what happened in the US in the 1970s and 1980s when manufacturing jobs were moved from the United States to other countries. Many local jobs were lost and cities went bankrupt,” he said.

CNN has asked TSMC for comment on its expansion plans.

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

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

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Semiconductors are an indispensable part of just about any electronic device. They are difficult to make due to the high development costs and level of knowledge required, meaning that much of the production is concentrated with a handful of suppliers.

Concerned about losing access to critical chips, especially as tension between China and the United States and between Beijing and Taipei has escalated, governments and major consumer-facing companies like Apple have asked semiconductor companies to localize their operations, experts said.

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

“It also suggests that TSMC’s customers are asking for more geographic diversification, something that was not previously the main concern of large customers.”

On Tuesday, TSMC said it increased its investment in the US by building a second semiconductor manufacturing plant in Arizona and increasing its total investment there from $12 billion to $40 billion.

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

These announcements alarm politicians like Chiu of the Taiwan People’s Party. He worries about losing the island as TSMC is courted worldwide.

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

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“This would make economic sense [the] lower salaries [and] higher quality from Taiwanese engineers,” he said, adding that the company needs approval from Taiwan’s Ministry of Economy to move its most advanced technologies abroad, which it probably wouldn’t give.

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

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

“Once you have a team of people doing development work, they work very 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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