The severe global chip shortage has repeatedly put TSMC’s importance in the global spotlight. The recent focus of public opinion has gone on to describe Taiwan’s semiconductor industry as a “silicon shield”, saying that its strength is strong enough to deter China’s attacks or avoid war.
TSMC Chairman Liu Deyin explained the “silicon shield” in an interview with CBS TV this week. He said, “Because the world depends on the collaboration of Taiwan’s high-tech industry, the world will make sure that war does not break out in this region, otherwise it will harm the interests of all countries.”
However, Taiwan’s “silicon shield” has now risen to become the world’s most important strategic material, will not instead trigger China’s covetousness and bring war? The parties are not without doubts.
The cover of the latest issue of the American Economist magazine describes the Taiwan Strait as “the most dangerous place in the world”. According to the article, Taiwan is not only at the forefront of the geopolitical game between the United States and China, but also the arena of the two powers’ technological rivalry. Especially in the top-end chip production, TSMC’s global market share of up to 84%, once China launched a war resulting in the shutdown of production, the global electronics industry will be shut down, the cost is huge.
According to a report released in April by the Boston Consulting Group (BCG) and the Semiconductor Association of America, as cited by Taiwan’s Central News Agency, if Taiwan’s foundry operations are disrupted, the global end market will suffer losses of up to $490 billion.
Taiwan’s silicon shield can avoid war?
Taiwan’s “silicon shield” is related to the global scale of industrial interests, but with the “silicon shield”, Taiwan is the world’s safest place, or the world’s most dangerous place? The various sectors are still at odds.
Alexander Neill, a former senior researcher at the Shangri-La Forum, says that Taiwan is the safest place in the world with the Silicon Shield, or the most dangerous. Alexander Neill, a former senior fellow at the Shangri-La Forum, said in an interview with the Voice of America that the term “silicon shield” has existed for many years, but has recently been hotly debated again because of the global concern over the chip shortage.
He said, in short, China has benefited for many years from the rapid development of semiconductors and TSMC’s supply, so the “silicon shield” to some extent provides insurance for Taiwan, so that China will not easily launch force against Taiwan, to disrupt such growth. In other words, the “silicon shield” may have the deterrent effect of avoiding war.
However, Neil said, with the previous U.S. administration launched a technology war against China to block China’s chip supply, coupled with TSMC’s power plant team in the United States, announced the establishment of a plant in Arizona, the United States, therefore, in this latest development, such a “silicon shield” is still not useful, it is difficult to say. In particular, China is also actively developing its semiconductor industry and wants to replace TSMC, although China’s semiconductor industry is too far behind and it is not an easy task to catch up.
Taiwan’s silicon shield has a hole?
Neil believes that, in general, the United States is committed to Taiwan’s security, and is also committed to maintaining Taiwan’s “silicon shield”. But he said the United States recently learned that the bigger problem is the excessive concentration of the semiconductor industry in Taiwan, the risk is too great, especially Taiwan itself is facing a shortage of water and electricity, which may affect the production capacity of semiconductors. In addition to the previous U.S. media Washington Post rumors that China’s People’s Liberation Army had placed orders to TSMC through the pipeline to buy chips for the development of ultra-high speed missiles, triggering Taiwan’s “silicon shield” has been infiltrated, or has been a hole in the hidden worry.
He said that this makes the United States must help Taiwan to respond to strengthen the second layer of the “silicon shield”, because a layer of “silicon shield” has obviously not enough force.
Neil said: “What the United States wants to do is to help TSMC actively expand its production base to the outside world, so that there will be a double layer of protection. That is, if the first layer of the “silicon shield” has been penetrated, then the second layer of the “silicon shield” is in (Taiwan’s) friends, including the United States, the development of cultivation of chip manufacturing plants.”
Taiwan’s first layer of “silicon shield” may be infiltrated, has caused concern in the United States. But the market recently rumored that TSMC may invest nearly $ 2.9 billion to expand the capacity of China’s Nanjing plant, will not create more opportunities for China to infiltrate it?
In response, Neal said the U.S. community may not be too happy about this development based on geopolitical pressure. But he also said the Biden administration might not be too strongly opposed to the development if it thought about it from a different perspective. That is, the Biden administration should, in principle, encourage TSMC to expand its production bases around the world, including the United States, Japan, Europe, and even China, in order to spread the risk and avoid the “silicon shield” triggering conflicts between the United States and China.
The United States and Japan to protect Taiwan’s silicon shield
Neil said that Taiwan’s “silicon shield” is not a part of the defense establishment, but only as one of the strategies to deter China from using force, especially TSMC is a public company, and its decisions are mostly based on long-term operations and the best interests of shareholders and other business considerations, and geopolitical developments may not be fully synchronized, and TSMC is unlikely to give up China This is a big piece of the market.
Although it is difficult to say for sure whether China will avoid war because of Taiwan’s “silicon shield”, a researcher at the Taiwan Institute for Economic Research in Taipei has said that it is not possible for TSMC to give up its market share in China. However, according to Dasheng Qiu, a researcher at the Taiwan Institute of Economic Research in Taipei, the “silicon shield” is absolutely secure for Taiwan because it involves the interests of various powerful countries in the world. In particular, he believes that neither the United States nor Japan will allow Taiwan’s “silicon shield” to fall into China’s hands, leaving them vulnerable to future technological rivalry.
Dasheng Qiu, a researcher at the Taiwan Institute of Economic Research in Taipei (Photo courtesy: Dasheng Qiu)
Speaking to the Voice of America, Dasheng Qiu said, “Having such advanced technology is a guarantee for Taiwan. I think this advanced process will lead the world powers to think that TSMC is the TSMC of the world, the TSMC that can consolidate the sustainable development of the global economy, and not anyone’s TSMC. Therefore, if China wants to use force to acquire TSMC, of course, everyone disagrees.
TSMC’s basic designs and semiconductor equipment come from the United States, so the U.S. is unlikely to let those technologies and equipment fall into the hands of its biggest competitor, China, Chiu said.
He also believes that TSMC will keep the most advanced process technology in Taiwan and continue to refine it to maintain Taiwan’s advantages and competitiveness, and thus provide Taiwan with self-assurance in the overall economy and regional security.
TSMC’s expansion to increase supply
Photo: Taiwan semiconductor giant TSMC Chairman Liu Deyin in an interview. (August 31, 2018)
As for TSMC’s recent active outward plant expansion, including a plant in the United States, and its intention to expand production in Nanjing, China, Qiu Dasheng believes that TSMC is purely from a business-oriented perspective of expanding supply and meeting chip demand to maintain worldwide economic momentum. He said, if TSMC does not expand production, so that the chip shortage continues, the global economy in the next few years will be greatly hindered by the recovery force, especially high-tech technology take off, the rise of intelligent products, the future demand for chips will only grow.
TSMC said through a press release in early April that it will invest $100 billion in the next three years to increase production capacity in response to market demand. The company said: “The industry megatrends of 5G and high-performance computing will drive strong demand for our semiconductor technologies in the coming years. In addition, the COVID-19 pandemic is accelerating digitalization in all directions.”
As the world’s leading semiconductor industry, TSMC has been the target of countries vying to set up factories. However, in mainland China, it was rumored in late April that some private citizens and Internet comments opposed its plan to expand 28nm process in Nanjing.
Chinese technology industry analyst Xiang Lizang previously called for an official boycott through a Weibo post. He said: “TSMC Nanjing expansion, precise blow 2023 mainland local chip manufacturing companies, with mainland water, mainland electricity, mainland policies, mainland cheap manpower, precise to dry the mainland’s chip manufacturing companies as soon as they appear, so that the advanced process to help the United States full control, backward process with dumping to take out the mainland’s competitors. “
Nanjing expansion incurred a boycott?
Xiang Lizang’s statement triggered many Chinese netizens echoed, but also immediately by the official and experts denounced as “ignorant, nonsense.”
Song Hong, deputy director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, also disagreed in an interview with the Voice of America. He said that China’s chip demand accounts for 30 to 40 percent of the world, so there is a huge gap, and the local industry’s production capacity is absolutely unable to meet. Although TSMC’s Nanjing plant is not a high-end process, he said, it can still meet the future needs of the Chinese market.
Song Hong said: “28nm chips, which technically speaking, is not very advanced, but most of the (product) demand is not particularly high-end chips, the demand for low-end is much greater. Therefore, I think, from this choice of TSMC, it (TSMC) for the whole (China) chip demand with an optimistic attitude. In addition, for the competition in the mainland market, I think, we also welcome such competition. Of course, I hope that there will be local enterprises, but TSMC’s investment, I think, is also very welcome.”
Song Hong believes that TSMC’s expansion in China can also drive China’s economic development, the cultivation of semiconductor talent and the clustering effect of the industry, so the boycotters are too narrow-minded in their views.
However, Song Hong sternly criticized the United States deliberately in the development of semiconductors to limit China’s development, and excessive pursuit of the United States and China in the field of high-end chip decoupling “incomprehensible”, he said, this is not only inconsistent with the logic of the market, but also impede the pursuit of the highest efficiency, maximum profit and more efficient production configuration of enterprises.
As for the political effect of Taiwan’s “silicon shield,” Song Hong is not indifferent. He said that Taiwan’s relationship with China is an internal one and has nothing to do with the United States. He said that the United States should not take the “silicon shield”, TSMC, or even the warming relationship between the United States and Taiwan to speculate on the development of the two sides of the Taiwan Strait. He believes that people on both sides of the Taiwan Strait do not want to go to war, but if the United States threatens the sovereignty and territorial integrity of other countries, it may force China to go to war.
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