In an effort to stay away from the US-China cold war, Taiwan’s top chip manufacturer TSMC started opening new plants abroad.
TSMC, the world’s biggest producer of semiconductors, opened its first plant in Japan on Monday. The company, mainly based in Taiwan, is increasing its internationalization efforts to strive away from US-China tensions around the home island.
Taiwan Semiconductor Manufacturing Company produces 92% of the world’s cutting-edge microchips, with clients such as Apple, NVIDIA, and other chip designers. Semiconductors are the core element behind the computing power of all digital devices. They are a crucial component of the modern economy, as well as modern military power.
Production in the new Kumamoto, Japan plant will begin in late 2024, TSMC said. The company acquired a majority stake in Japan Advanced Semiconductor Manufacturing Inc., widely considered to be years behind TSMC’s proprietary technology.
JASM will also open a second plant funded by Sony Semiconductor Solutions, Toyota, and Denso.
Last August, TSMC also announced a new joint venture to open facilities in Europe. It will also open two chip manufacturing plants in Arizona for a total investment of $40 billion. The latter investment falls under the umbrella of Joe Biden’s CHIPS Act, a bill aiming at re-shoring microchip production.
The new foreign plants open as tensions between China and the United States rise, concentrating on the question of Taiwan’s independence.
The semiconductor shield
Taiwan is considered a breakaway rebel province by China. Beijing actively sought reunification with Taiwan by any means possible, including a direct invasion of the island. On the other hand, Taiwan is a close US ally, which pledged to protect it in case of foreign invasion.
Besides US protection, Taiwan has managed to shield itself from Chinese attacks by becoming indispensable. Its semiconductors are unparalleled anywhere in the world, and China is also a regular customer of TSMC. The company also possesses strict industrial secrets that prevent China (or any other country) from copying its top-notch factories.
As tensions rose between the world’s two superpowers, however, the US felt unsure about TSMC’s dominance of the chip sector. Washington and US chipmakers like NVIDIA pushed for a reshoring of the industry, bringing manufacturing back into the United States or in less dangerous countries.
US Commerce Secretary Gina Raimondo also increased restrictions on American chip designers against exports to China.
And now TSMC is striving to protect of its businesses without being embroiled in a new Cold War. By opening new factories, however, the risk of spillover will increase, likely diminishing Taiwan’s deterrence against a Chinese invasion.
