Pelosi’s trip to Taiwan puts the world’s biggest chipmaker back in the spotlight of the US-China rivalry

Taiwan Semiconductor Manufacturing Company (TSMC) is the world’s largest contract chipmaker. But it was pushed amid US-China geopolitical tensions. logo displayed on the screen.

Raphael Henrique | Sopa Pictures | Light flare | Getty Images

US House Speaker Nancy Pelosi may have left Taiwan, but the visit has once again shed light on the island’s critical role in the global chip supply chain and in particular on the world’s largest chipmaker, Taiwan Semiconductor Manufacturing Co., or TSMC.

The controversial visit, which angered Beijing, saw Pelosi meet with TSMC Chairman Mark Liu, a sign of the crucial importance of semiconductors to US national security and the vital role the company plays in manufacturing most advanced chips.

Semiconductors, which go into everything from our smartphones to cars and refrigerators, have become a key part of the technology rivalry between the United States and China in recent years. More recently, a shortage of semiconductors has prompted the United States to try to catch up with Asia and maintain a lead over China in the industry.

“Taiwan’s unresolved diplomatic status will remain a source of intense geopolitical uncertainty. Even Pelosi’s trip underscores Taiwan’s importance to both countries,” Reema Bhattacharya, head of Asia research at Verisk, said Wednesday. Maplecroft, to CNBC’s “Street Signs Europe.”

“The obvious reason being its critical strategic importance as a chipmaker and in the global semiconductor supply chain.”

Pelosi’s visit to Taiwan and his meeting with TSMC shows that the United States cannot do it alone and will require collaboration with Asian companies that dominate the most advanced chips.

The crucial role of TSMC

TSMC is a foundry. This means that it manufactures chips designed by other companies. TSMC has a long list of customers, from Apple to Nvidia, some of the biggest tech companies in the world.

While the United States has lagged behind in chipmaking for the past 15 or so years, companies like TSMC and Samsung Electronics in South Korea have advanced with cutting-edge chipmaking techniques. Although they still rely on tools and technologies from the United States, Europe and elsewhere, TSMC in particular has managed to cement its place as the world’s leading chipmaker.

TSMC represents 54% of the global foundry market, according to Counterpoint Research. Taiwan as a country alone accounts for around two-thirds of the global foundry market when considering TSMC alongside other players like UMC and Vanguard. This highlights Taiwan’s importance in the global semiconductor market.

When you add Samsung to the mix, which has 15% of the global foundry market share, Asia really dominates the chip manufacturing sphere.

That’s why Pelosi made it a point to meet with the president of TSMC.

Taiwan invasion fears

China views democratically self-governing Taiwan as a renegade province that must be reunited with the mainland. Beijing spent weeks telling Pelosi not to come to Taiwan.

During its visit, China heightened tensions by conducting military exercises.

There are fears that any form of Chinese invasion of Taiwan could massively affect the power structure of the global chip market, giving Beijing control over technology it did not previously have. On top of that, there are fears that an invasion could choke off the rest of the world’s supply of advanced chips.

“Most likely the Chinese would ‘nationalize’ it (TSMC) and start integrating the company and its technology into its own semiconductor industry,” Abishur Prakash, co-founder of consulting firm Center for Innovating the Future. by email.

What is the United States doing?

How does China position itself?

The minimum wage is crucial to China’s ambitions, but sanctions have cut it off from the key tools it needs to make the most advanced chips like TSMC does. The minimum wage is years behind its competitors. And China’s semiconductor industry still relies heavily on foreign technology.

TSMC has two chip fabs in China, but they produce less sophisticated semiconductors unlike the fab in Arizona.

Chipmaking alliances

The United States is seeking to form semiconductor partnerships with allies in Asia, including Japan and South Korea, to secure supplies of crucial components and maintain a lead over China.

TSMC, meanwhile, is caught in the middle of the US-China rivalry and could be forced to choose sides, according to Prakash. His commitment to an advanced semiconductor factory in the United States could already be a sign of the country with which he is siding.

“In fact, a company like TSMC has already ‘chosen sides’. It invests in the US to support American chipmaking and has said it wants to work with ‘democracies’, like the EU, on chipmaking. “, said Prakash.

“Increasingly, companies are adopting an ideological tone in the people they work with. The question is, as tensions between Taiwan and China increase, will TSMC be able to maintain its position (align with the West), or will he be forced to recalibrate his geopolitical strategy”.

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