It is the story of a society essential to the smooth running of the world, nestled in discretion as in a warm winter duvet. Since its creation in 1987, the Taiwanese firm TSMC (Taiwan Semiconductor Manufacturing Company) has stood out in the semiconductor sector, providing the basis for miniature chips integrated into all of our everyday electronic products. These form the nervous system of smartphones, modern cars, or even a simple espresso machine.
TSMC, valued at nearly 500 billion dollars, has a virtual monopoly on the most advanced nodes – judged according to their engraving fineness, 7 nanometers and less – which it produces on its island, which thus owes it a much of its prosperity. Despite its modest demographics – only 24 million inhabitants – thanks to electronic chips, Taiwan has become one of the greatest economic powers on the vast Asian continent. “TSMC is more than a flagship, it is a real source of national pride, embodying the industrial excellence of the country,” underlines Mathieu Duchâtel, head of the Asia program at the Institut Montaigne. A summary of his DNA. “Taiwan has always focused on a few niches. It has few or no brands, mainly exports for others, leaving them to build their reputation,” adds Pascal Viaud, head of the Ubik company and president of the semiconductor section at the France-Taiwan Chamber of Commerce and Industry.
But two closely related phenomena have placed the firm in a worrying light that it had carefully avoided until now. American trade sanctions on semiconductors against China, which since 2020 have deprived this country of the most sophisticated chips manufactured by TSMC. Then, the health crisis, which began the same year, which simultaneously exploded technological needs and exposed the world’s enormous dependence on Taiwanese society. These events impact TSMC at different levels. Covid-19 has pushed States to diversify their supplies or to reindustrialize by voting for massive investment plans, giving rise to a strange scent of the end of globalization.
American restrictions, for their part, disturb relations with the Chinese neighbor, which regularly reiterates its wish to regain control of the island, still considering it as one of its provinces. Since then, in addition to the 70,000 people that TSMC employs, the firm has hired the services of… a geopolitical analyst. Which does not prevent the two aforementioned events from generating the same anxiety: that this national pride, willingly or by force, gradually distances itself from its land of origin.
“Taiwan’s defense does not rely on semiconductors”
Naturally, TSMC is at the heart of the island’s presidential election held on Saturday January 13 (and followed by a legislative vote). The very first since the upheavals of 2020. During a televised debate earlier this month, Jaw Shaw-kong, the candidate of the Kuomintang (KMT), Taiwan’s largest opposition party, did not fail to pull on that heartstrings. The politician insinuated that the current climate in the Formosa Strait contributes to a “leakage” phenomenon from TSMC, which over the past three years has invested in the construction of factories in the United States, Germany, as well as ‘in Japan. Never seen before in its history.
This phenomenon apparently shakes its “silicon shield”. According to this expression by the American journalist Craig Addison, invented in the early 2000s, Taiwanese hegemony in semiconductors (made from silicon) would in fact protect it from a Chinese offensive. The cost of a military operation would be too great for China since electronic chips are essential to the whole world. No one would let her do that. This shield is itself claimed by the Taiwanese establishment. The semiconductor industry is a “sacred mountain that protects us,” Hsiao Bi-khim, the country’s vice-presidential candidate and William Lai’s running mate for the Democratic Progressive Party (DPP), currently in office, recently recalled. power. Unless, of course, TSMC exports its know-how to “de-risk” itself. Like in the United States, for example.
This hypothesis turns out to be, in reality, very improbable. TSMC above all gave in to the colossal subsidies agitated by a handful of allies and agreed to produce certain types of very specific chips outside the island. This is the case in the Japanese archipelago for specialized image sensors, or in Germany for the automotive sector. Or political pressure. In Arizona (United States), both the most massive and most criticized investment (around $40 billion), the chip production planned from 2025 or even 2026 will certainly be among the most advanced in its range… but of the current generation. “The following ones, the most powerful, under 3 nanometers (2nm and 1.4nm) will be produced in Taiwan,” indicates Mathieu Duchâtel. Mark Liu, the boss of TSMC, leaving on the sly (yet another symbol of the firm’s discretion), confirmed that the feats of innovation achieved by the company over the last three decades from its home base were not reproducible elsewhere. The crown jewels will not move.
The fragility of the “silicon shield” nevertheless remains a real subject, increasingly debated among experts. “I think it’s misleading,” historian Chris Miller, author of the noted essay, told L’Express. Chip War (2022), on the immense battle of electronic chips. Taiwan’s defense lever is not semiconductors, but the military power of the United States and Taiwan. China has been trying to take over the island since 1949, long before the invention of semiconductors. The reason why there is greater concern today than at any other time is that the Chinese military is more powerful than it has ever been.” What if Taiwan was therefore attacked after all by its imposing neighbor? “Everything is in the hands of the United States and China, and how they are going to maintain this status quo, which both parties want,” also affirmed Mark Liu, in an interview with New York Times last summer, essentially reducing Taiwanese semiconductors to the simple role of fuse in this duel of the titans.
Dependence and competition
It is not yet time to panic. “The majority of Taiwanese are convinced that there will be no conflict in the short term with China. We feel, on the spot, a certain confidence and serenity in relation to this danger,” notes Pascal Viaud. Cultural and economic exchanges – including on the lower quality chips – still take place between the two nations. The other anxiety, about TSMC, is much more down to earth: is Taiwan too dependent on it? Semiconductors represent more than 40% of the country’s exports, with ten points taken over the last seven years. This is no less than a quarter of GDP in 2022, according to a report from the Atlantic Council, an American think tank specializing in international relations. The enormous need for chips today for the boom in artificial intelligence certainly benefits the country, but also has a counterpart. “Right now, when the electronics world is in crisis, the Taiwanese economy is suffering because a large part of the island is linked to it,” says Chris Miller. The other little-known pearl of Taiwan, Foxconn, operates in the same sector: it is the official assembler of Big Tech, and in particular, of the Apple iPhone.
In terms of criticism, another presidential candidate, Ko Wen-je, former mayor of the capital Taipei, also expressed concern about the growing income gap between those who work in flea markets and others. TSMC is grabbing all the available talent, and there are fewer and fewer of them. Taiwan, which has one of the lowest birth rates in the world, relies heavily on immigration to fill its factories, but struggles to train its new elites. The industry is also singled out for its high consumption of energy resources. TSMC alone monopolizes 7 to 8% of the island’s electricity, and the company also requires phenomenal quantities of water for its chips while shortages are being felt. Finally, it spreads its factories over the equivalent of several hundred football fields. Rarely, a large factory project was abandoned by TSMC in the north of the main island this fall, due to an outcry from local residents. “TSMC is starting to feel a little cramped on its island…”, breathes Pascal Viaud.
Faced with these ecological challenges, the firm must also battle on the technological level. Competition has increased in recent years with the Korean Samsung and the American Intel. Moore’s law, formulated in 1965, and predicting that the power of processors would double every two years, which TSMC embodied through its progress, is coming to an end. There is room for diversification, for experimentation with new techniques such as “heterogeneous integration”, roughly consisting of combining several types of materials, circuits and semiconductor components within a single system. “There, everyone is at a bit of the same point,” estimates Mathieu Duchêne. Including vengeful China. TSMC has an imperative obligation to maintain its industrial advance; the future of Taiwan depends on it. By assuming, and this is new, its geopolitical status, because the future of the world is also played out, in part, within its walls. His existence lurking in the shadows is a priori over.
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