- Kyle Chua
Pelosi Taiwan Visit Could Spell Trouble for Chipmaker TSMC
The global chip sector appears to be bracing for the worst if tensions between the U.S. and China continue to escalate.
Mark Liu, the Chairman of Taiwan Semiconductor Manufacturing Company (TSMC), said in an interview with CNN, "The war brings no winners, everybody’s losers,” referring to how his factory could be rendered "not operable" if China were to invade Taiwan. His seemingly grim prediction was made amid U.S. House Speaker Nancy Pelosi’s visit to Taiwan, defying threats and warnings from China.
Mr Liu, who heads the largest semiconductor manufacturing company in the world, said his plants heavily rely on global supply chains, so any disruption could hurt production operations.
TSMC supplies some of the flagship processors of American tech heavyweights like Apple and Qualcomm and covers about half of the world’s semiconductor foundry market. The chip giant also has the most advanced foundry technologies in the world, currently relying on the 5nm process, with development for its successor, the 3nm, already underway.
"Nobody can control TSMC by force. If you take a military force or invasion, you will render TSMC factory not operable," said Mr Liu. "Because this is such a sophisticated manufacturing facility, it depends on real-time connection with the outside world, with Europe, with Japan, with U.S., from materials to chemicals to spare parts to engineering software and diagnosis."
Ms Pelosi, who's second in line to the U.S. presidency, landed in Taiwan on Tuesday evening. She’s said to be the highest-profile elected official to visit the country in 25 years. Her headline-making official Asian trip kicked off with a visit to Singapore where she met with top officials, including Prime Minister Lee Hsien Loong.
Beijing sees the move as a direct threat, having long claimed that Taiwan is part of its territory. It has promised to take drastic countermeasures, but as to how remains to be seen.
Taiwan is considered the most important country in the global semiconductor industry. The likes of Intel and Tesla, among so many other global companies, rely on it to produce processors that power smartphones, computers and autonomous vehicles, to name a few. The country is expected to increase its global market share to a whopping 66% by the end of the year.
That means if China were to retaliate against the U.S. and take action against Taiwan, the ongoing global chip shortage could take a dramatic turn for the worse. Mark Williams, Chief Asia Economist at Capital Economics, noted TSMC has a close partnership with Dutch firm ASML to produce an advanced microchip. So if a full-scale invasion by China were to ever occur, chances are ASML will fly key staff out of Taiwan, which in turn will leave TSMC without any support.
But an invasion is not the only threat at play here. If China, for example, blocks Taiwan's borders and decides to dictate what goods flow in and out of the country, chip supplies could similarly be disrupted. China might also have other ways of hurting Taiwan in retaliation against the U.S. that the world has yet to see. What seems clear, however, is that the chip sector will be a casualty of this geopolitical spat between two superpowers.
This explains why TSMC has been recently shifting operations out of Taiwan, building a US$12 billion plant in Arizona and a US$8.6 billion plant in Japan. The chipmaker also pledged US$100 billion over the next three years to boost its production output in an attempt to resolve the ongoing chip shortage brought about by the pandemic.
Pelosi's trip also comes in the middle of reports that claim the U.S. is considering limiting shipments of chipmaking equipment to memory chip makers in China. The move is allegedly being done in a bid to halt China's advances in the semiconductor sector. Among those that could be affected by the crackdown include the Wuhan-based Yangtze Memory Technologies Co Ltd and South Korean juggernauts Samsung Electronics Co Ltd and SK Hynix Inc, both of which have plants in China. The plan is said to be still in its early stages and has yet to be approved by the Biden administration.
Mark Liu, the Chairman of chip manufacturing giant TSMC, said in an interview, that his factory in Taiwan could be rendered "not operable" if China were to invade the country in retaliation against U.S. House Speaker Nancy Pelosi's visit.
Ms Pelosi, who's second in line to the U.S. presidency, landed in Taiwan on Tuesday evening in a move that Beijing sees as a direct threat, having long claimed Taiwan as its territory.
Taiwan is expected to increase its global market share in the semiconductor market to a whopping 66% by the end of the year.
That means if China were to retaliate against the U.S. and take action against Taiwan, the ongoing global chip shortage could take a dramatic turn for the worse.