The debate over such a deterrent has heated up now that the pandemic has seriously disrupted most supply chains. The U.S. has also placed restrictions on exports of chips and chip-making equipment using U.S. design and technology to China — a development that some observers also fear may end up provoking China to increase aggression toward Taiwan.
But Darson Chiu, a research fellow at the Taiwan Institute of Economic Research (TIER) in Taipei, disagreed, saying that he believes the world will stand behind Taiwan.
“The world’s superpowers will view TSMC as a key driver behind the future global economic revival, which belongs to no one but the world. Hence the world will not tolerate China’s use of force to control TSMC,” Chiu told VOA over the phone.
Double layer of protection
The island’s dominance in chip-making has fueled the debate over its silicon shield, but the U.S. is more concerned that the shield may “have holes in it” and the technology is being used by China’s military, according to Alexander Neill, a former Shangri-La Dialogue senior fellow for Asia Pacific security at the International Institute for Strategic Studies.
An earlier Washington Post report alleged that a Chinese firm had used TSMC chips in the Chinese military’s development of hypersonic missiles. But the company denied the charges.
The U.S. is also concerned about vulnerabilities caused by TSMC production being concentrated in Taiwan. The island’s water and electric supply shortages could disrupt production.
“What the United States wants to do is to help TSMC diversify its production base so that there’s a double layer of protection. So, if the first shield is being penetrated, the second [reinforcement] shield is to nurture the chip production base in friends and ally countries including the United States,” Neill told VOA over the phone.
TSMC has planned to invest $100 billion in the next three years on new production facilities including a state-of-the-art wafer fabrication plant in the U.S. state of Arizona and expansions of its Nanjing, China-based fab to produce 28 nanometer chips for auto makers.
The move aims to increase TSMC’s capacity, which is currently working at full capacity, to meet surging demand and support future growth in the global economy, TIER’s Chiu said.
In a stock exchange filing last month, TSMC said it “is entering a period of higher growth as the multiyear megatrends of 5G and HPC (high performance computer) are expected to fuel strong demand for our semiconductor technologies in the next several years. In addition, the Covid-19 pandemic also accelerates digitalization in every aspect.”
But Powerchip’s Huang questions if overseas wafer fabs will be as cost effective as those based in Taiwan. He said that many fabs in the U.S. and Germany have proved to be too expensive to sustain.
Expansion in China
For years, China’s attempts to manufacture chips have failed since China lacks access to the intellectual property required for the process.
Hence, TSMC’s expansion plan in its Nanjing plant is welcomed by many in China despite worries that the survival of homegrown chipmakers may be threatened by the Taiwanese chipmaker, according to Song Hong, assistant general director at the Institute of World Economics and Politics under the Chinese Academy of Social Sciences.
“28nm chips aren’t high-end. But mid- to low-end chips are in higher demand. So, I think this shows TSMC’s optimism in China’s future demand. It is in our hope to bolster homegrown chipmakers, but we also welcome competition,” Song told VOA.
Song, however, shrugged off the geopolitical implications of Taiwan’s silicon shield, saying that China views Taiwanese issues as domestic affairs and will not be deterred from its goals by U.S. action.