As a luxury sales representative, Wang Mei-hua is in Paris, to defend Taiwanese start-ups at the VivaTech show, devoted to innovation, and to establish new industrial cooperation, particularly in renewable energies (offshore wind power), after that the Taiwanese company ProLogium has announced its project to build batteries for electric vehicles in Dunkirk. The Minister of Economy in the government of Taiwanese President Tsai Ing-wen (supporter of a firm line vis-à-vis Beijing) describes to The Express how the island of 24 million people has established itself as the world champion in advanced semiconductors – crucial components of all sectors of the future – and is now adapting to the growing tensions between Beijing and Washington. And to the growing fears of its customers of a Chinese attack on Taiwan.
L’Express: Taiwan accounts for some 60% of the world’s production of semiconductors and even 90% for advanced chips. At a time when the Chinese threat continues to grow, what would be the consequences for the world economy if Beijing attacked the island or imposed a blockade on it?
Wang Meihua: We do indeed occupy an extremely important place in the world production of semiconductors, in particular for advanced chips (less than seven nanometers). Today, we manufacture three-nanometer chips in Taiwan itself; and two-nanometer chips are being researched and developed. They are essential components for all new technologies. As an example, Apple’s iPhone 15 uses three-nanometer chips produced by TSMC [n° 1 mondial des semi-conducteurs, NDLR]. Nvidia [le créateur de ChatGPT]also sources from this manufacturer for its artificial intelligence services.
But Taiwan is not limited to semiconductors: we also produce servers, graphics cards, printed circuits… We can imagine that if Taiwan were no longer able to supply international markets, the entire world economy would would be paralyzed. US Secretary of State Antony Blinken estimated that if the island faced such a risk, the economic damage would be extremely significant on a global scale, and in particular for China. They would even be much more spectacular than those caused by the war in Ukraine.
How do you explain this domination of a country of 24 million inhabitants over a sector as strategic as semiconductors? Is it linked to your history, to education, to investments, to the priorities set by the State?
All of these factors come into play. The semiconductor industry was born more than 40 years ago. You have to keep in mind that Taiwan does not benefit from natural resources. It was therefore essential to invest in technological innovation to be competitive internationally. The government has created technology hubs around semiconductors, providing land, infrastructure, and releasing resources for training. The existence of these centers has encouraged universities to engage in research. R&D centers have appeared. All this has created a complete and sophisticated ecosystem around semiconductors, which today allows Taiwan to continue to progress. Added to this is the relevance of TSMC’s business model. The group has succeeded in establishing itself as the supplier of various customers without causing conflicts of interest, by protecting their intellectual property rights.
Taiwan remains highly dependent on China for trade. What is your strategy to reverse the trend?
Trade between Taiwan and China is massive. Last year, Taiwan’s exports to China (including Hong Kong) reached 42% of our total exports. This year, due to the changing economic situation in China, this proportion fell to 35% last month. But these figures also concern semiconductors produced in Taiwan, then exported to China to assemble iPhones which will then be sold in the United States.
The products exported by Taiwan to China are of better quality than those which it manufactures: therefore, even if we speak of dependence on the Chinese market, we can also say that China often does not have a he other choice than to buy from Taiwan…
At the same time, with the deterioration of relations between Washington and Beijing, American companies have in recent years asked their suppliers, often Taiwanese, not to be present only in China, so as not to depend on a single country. The latter are in the process of relocating part of the factories installed in this country to South-East Asia, in particular to Vietnam. Our investments in this zone even exceeded those made in mainland China last year. As a result, our exports to this geographical area are constantly increasing.
TSMC will build two state-of-the-art semiconductor factories in Arizona for $40 billion. Isn’t this likely to weaken the supremacy of Taiwanese territory in this area?
Most of TSMC’s customers are American: Apple, Nvidia or Qualcomm. Some customers wanted the group to diversify its production sites. TSMC wanted to respond to this request. However, this installation will generate additional production costs, which the American government will compensate by paying subsidies.
The vast majority of advanced chip production will still continue to be located in Taiwan. As well as all research and development work. And next-generation chips will be produced on the island first. Even if factories will emerge in the United States or Japan, this will in no way affect the importance of Taiwan as a production base.
Due to the risks of war, large tech companies are concerned that many of their subcontractors are based in Taiwan. How do you dissuade them from settling elsewhere?
It is in Taiwan that one finds all the equipment and the chemical agents necessary for the manufacture of advanced semiconductors. However, many of the suppliers of these chemical components are American, European and Japanese. They continue to invest in Taiwan because that’s where the R&D is. Last year, their investments jumped 80%. Today, we are the only ones to offer this level of innovation.
Take the example of the French group Air Liquide, based in Taiwan. The company produces extremely pure gases. But in the process of producing chips of five or three nanometers, it is necessary to be able to adjust the formulas of these gases. And therefore to have a factory on site. Of course, maintaining a stable relationship with China is essential to continue innovating.
France will host a factory of the Taiwanese electric battery manufacturer ProLogium, which will invest 5.2 billion euros in Dunkirk: Why did you choose our country?
ProLogium has taken 17 to 18 years to develop this solid state battery technology. They are stronger, safer, smaller, and have a greater autonomy than current liquid batteries. This is a technology that very quickly interested European car manufacturers. Batteries being a fairly heavy product, it was also interesting to produce as close as possible to the markets. In Europe, the choice fell on France, and on Dunkirk, in particular because of its geographical position – which makes it possible to supply all of Europe -, an already existing ecosystem, and inexpensive electricity resources. Finally, the project was supported by the French President, Emmanuel Macron, who is a big believer in this technology.
In the first quarter, Taiwan entered a recession, with a second consecutive decline in GDP. How to explain it?
Taiwanese exports in the first three months of the year are down compared to last year [de 19,2 %]. Many products made in Taiwan are destined for overseas markets. If the global economy slows down, that obviously has an impact on Taiwan. This context can be explained by the war in Ukraine, the resulting inflation and the rise in the cost of energy. All this has reduced the purchasing power of households, which have less money to buy electronic products.
However, there is good news to mention: the rise of artificial intelligence applications. However, the chips used by Nvidia, and its servers, are all produced in Taiwan. Given the needs, we can expect a rebound in exports at the end of the year.
Taiwan is seeking to sign free trade agreements in the Asia Pacific region, but also with the United States. But for the moment, it does not materialize, because of the pressure exerted by China. Do you have any hope of removing these blockages?
Signing free trade agreements is a real political challenge for us. Recently, however, Taiwan and the United States signed an agreement under their 21st Century Trade Initiative. The document [qui intègre la facilitation des échanges commerciaux] was unanimously approved by the US Parliament. This shows the support given by the United States to Taiwan. This is a good signal sent to other countries to encourage them to forge economic cooperation ties with us. Taiwan also wishes to join the CPTPP, successor to the Trans-Pacific Partnership. We negotiate with member states to show that our standards meet the requirements of this group. In general, Taiwan is exploring all possibilities for bilateral and multilateral cooperation.