Taiwan Semiconductor Manufacturing Co (TSMC) is popularly known as Taiwan’s guardian angel, or alternatively as its “silicon shield.”
In both cases, the idea is that the importance of the semiconductor chips it produces is such that China would hold back from a military invasion against Taiwan for fear of destroying the source of advanced chips that it needs for its own economy to thrive; at the same time, Taiwan’s allies, including the US, EU countries and Japan, would come to its defense not just because of geopolitical considerations, but also due to concerns that a successful Chinese invasion would almost certainly lead to a halt in the supply of TSMC’s chips, either because its plants were destroyed or as they would fall into the hands of the Chinese Communist Party (CCP).
Some commentators say that it is TSMC’s importance that bolsters the CCP’s desire to take control of Taiwan, that TSMC’s very importance could work against Taiwan’s security.
The concept of the “silicon shield” is nuanced: Not all chips are made equal, nor are all semiconductor fabs, nor are all workforces with the required skills, nor are the strategic considerations of the parties involved, be they national governments or TSMC itself.
The company has already agreed to build plants in China, the US and in Japan, and this week it revealed plans to build a 12-inch wafer fab in Dresden, Germany, as part of a joint venture to be called European Semiconductor Manufacturing Co (ESMC), of which TSMC would have 70 percent ownership.
This branching out overseas might give rise to concerns that the company is diluting Taiwan’s silicon shield, but it is not as simple as that.
The decision to build fabs overseas, especially in the US, Japan and Germany, is to allay those countries’ fears of over-reliance on one source in a vital supply chain. Each one of those countries has its own specific reason not to want to be caught without needed chips.
It is important to realize, too, that the overseas fabs would not be producing the most advanced chips. ESMC is to produce chips that are suitable for the automotive industry, the lack of which caused automotive production delays during the COVID-19 pandemic. TSMC said in January that in about five years, about 20 percent of its 28-nanometer-and-below capacity would come from overseas fabs.
Not only would the most advanced, 2-nanometer semiconductors be produced in Taiwan, but the company has plans to open more fabs in the next few years. It is currently building a plant for next-generation 2-nanometer chips in Kaohsiung, plans to produce them in its Hsinchu plant and is also looking to secure a site in Taichung for a third 2-nanometer chip plant.
TSMC holds a 90 percent market share in these most advanced semiconductors, which the overseas fabs cannot produce, and it makes them under secure conditions to ensure the technology remains in Taiwan and the company keeps hold of its competitive edge.
TSMC chairman Mark Liu (劉德音) says that the company is far too invested in Taiwan, with its established technologies, facilities, researchers and skilled workforce, to be able to transport its most cutting-edge operations overseas.
The question of whether it is wise to concentrate advanced semiconductor production in Taiwan remains, but concerns over whether it is still Taiwan’s silicon shield can be disregarded, if one believes the silicon shield theory in the first place, which not everyone does.
In an interview with the New York Times, Liu said, “China will not invade Taiwan because of semiconductors. China will not not invade Taiwan because of semiconductors.”
He himself therefore rejects the idea of the silicon shield, as he does the idea that TSMC puts Taiwan at risk.
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