The world is experiencing a shortage of semiconductors, and as Taiwan is a big global player in chip manufacturing, several countries have turned to the nation for help.
As the world is fighting over Taiwanese chips, a feeling of overdependence on Taiwan has begun to emerge. This poses a challenge to the status of Taiwan’s semiconductor industry. Whether local companies can smoothly help these countries weather the crisis would affect the countries’ semiconductor arrangements once the crisis is over. It could also have an impact on the global semiconductor ecosystem.
According to some international commentary, the global dependence on Taiwanese semiconductors has reached dangerous levels. This kind of commentary is nothing to be happy about; on the contrary, it is quite frightening.
That the chip shortage is seen as a crisis and that dependence on Taiwan is seen as being dangerous imply that once the crisis is over, other countries will try to find ways to avoid a recurrence. They would do this by lowering their dependence on Taiwanese chips, and in the end they would unavoidably move toward chip self-sufficiency.
The EU in particular has worked toward self-sufficiency in key components. It established a lithium battery plant to great fanfare, and once this crisis has passed, perhaps semiconductors would be its next target for self-sufficiency.
There are, of course, no guarantees that the countries striving for chip self-sufficiency could shake the industry position of Taiwan’s semiconductor plants, even if they succeed in becoming self-sufficient.
However, as Semiconductor Equipment and Materials International Taiwan president Terry Tsao (曹世綸) has said, when production capacity is insufficient, other countries could start thinking that Taiwanese manufacturers hold a monopoly position and resort to pressuring them using non-economic means. These could include supporting domestic companies and blocking competition from Taiwanese manufacturers.
For these reasons, an extended chip crisis could also be a crisis for Taiwanese manufacturers, and it would have a negative impact on medium to long-term development.
Taiwanese manufacturers need to become reliable partners in the industry supply chains so that when their partners have urgent demands, they can timely provide help.
The main reason for the automotive chip crisis is that vehicle manufacturers failed to build up their stocks in time, and the crisis thus has nothing to do with Taiwanese manufacturers.
Still, now that these manufacturers have risen to a key position in the supply chain, they must fulfill the responsibilities that come with that role, and not allow imbalances in supply and demand force their supply chain partners to suspend operations.
This kind of responsible behavior would allow Taiwan’s manufacturers to consolidate their leading position, and it is also the only way that other countries would be comfortable with being dependent on Taiwanese manufacturers, rather than trying to find ways of reducing that dependence.
Many strategists want to use the current situation to obtain additional benefits, but there is only one strategy for Taiwan: to do everything possible to meet every party’s needs, end the crisis as soon as possible and find ways to prevent it from recurring. For example, if key semiconductor manufacturers established spare capacity, Taiwan could become the only solution to the global semiconductor problem.
Chao Wen-heng is an associate research fellow at the Taiwan Institute of Economic Research.
Translated by Perry Svensson
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