Pelosi’s visit to Taiwan brings US-China rivalry back to TSMC’s attention

Taiwan Semiconductor Manufacturing Company (TSMC) is the largest contract chip manufacturer in the world. But this happened in the midst of geopolitical tensions between the US and China. the logo is displayed on the screen.

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Speaker of the US House of Representatives Nancy Pelosi may have left Taiwan, but the visit once again brought attention to the island’s important role in the global chip supply chain and, in particular, to the world’s largest chipmaker. Taiwan Semiconductor Manufacturing Companyor TSMS.

In a controversial visit that angered Beijing, Pelosi met with TSMC Chairman Mark Liu, a testament to how critical semiconductors are to US national security and the important role the company plays in manufacturing the most advanced chips.

Semiconductors, which power everything from our smartphones to cars and refrigerators, have become a key part of the US-China technology rivalry over the past few years. More recently, semiconductor shortages have prompted the US to try to catch up with Asia and maintain industry leadership over China.

“Taiwan’s unsettled diplomatic status will remain a source of serious geopolitical uncertainty. Even Pelosi’s trip highlights how important Taiwan is to both countries,” Rima Bhattacharya, head of Asian research at Verisk Maplecroft, told CNBC’s Street Signs Europe on Wednesday.

“An obvious reason is its critical strategic importance as a chip manufacturer and in the global semiconductor supply chain.”

Pelosi’s visit to Taiwan and meeting with TSMC show that the US cannot do this alone and will require cooperation from Asian companies that dominate the most advanced chips.

The decisive role of TSMC

If the US has lagged behind in chip manufacturing for the past 15 years or so, companies like TSMC and Samsung Electronics in South Korea have moved ahead with advanced chip manufacturing technologies. While they still rely on tools and technology from the US, Europe and elsewhere, TSMC in particular has managed to cement its place as the world’s leading chipmaker.

According to Counterpoint Research, TSMC accounts for 54% of the global foundry market. As a country, Taiwan alone accounts for about two-thirds of the global foundry market when TSMC is considered along with other players such as UMC and Vanguard. It highlights Taiwan’s Importance in the Global Semiconductor Market.

Add to this Samsung, which accounts for 15% of the global foundry market, and Asia really dominates the chip industry.

That’s why Pelosi chose to meet with the TSMC chairman.

Fears of an invasion of Taiwan

China sees democratically self-governing Taiwan as a renegade province that needs to be reunification with the mainland. Beijing spent several weeks trying to persuade Pelosi not to come to Taiwan.

During her visit, China escalates tensions with military exercises.

There are fears that any Chinese invasion of Taiwan could seriously affect the power structure in the global chip market, giving Beijing control over technology it did not previously have. In addition, there are fears that the invasion could cut off the supply of advanced chips to the rest of the world.

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

What is the US doing?

How is China shaping up?

SMIC is critical to China’s ambitions, but sanctions have cut it off from the key tools needed to produce the most advanced chips, as TSMC does. SMIC remains years behind its competitors. And China’s semiconductor industry is still highly dependent on foreign technologies.

TSMC has two chip manufacturing plants in China, but they produce less sophisticated semiconductors than the Arizona plant.

Chip Alliances

US searched form semiconductor partnerships with allies in Asia including Japan and South Korea as a way to secure supplies of critical components and maintain an edge over China.

Prakash said TSMC, meanwhile, has found itself in the middle of a rivalry between the US and China and may be forced to choose sides. His commitment to a cutting-edge semiconductor manufacturing plant in the US may already be a sign of which country he’s on.

“Actually, a company like TSMC has already ‘picked sides’. He is investing in the US to support American chip manufacturing and has said he wants to work with “democracies” like the EU in chip manufacturing,” Prakash said.

“Increasingly, companies are taking an ideological tone with whom they work with. The question is whether TSMC will be able to maintain its position (by joining the West) if tensions between Taiwan and China escalate, or if it will be forced to recalibrate its position.” geopolitical strategy.