Many analysts point to Taiwan’s world-leading chip industry as one of the factors in the conflict with China.
China has recently sharply increased pressure on the autonomous island. Chinese military aircraft are becoming increasingly challenging. In a speech on Saturday, Chinese President Xi Jinping promised that reunification with Taiwan “will and can be realized.”
At the same time, the West’s interest in Taiwan is also great. The United States has long supported the authorities militarily. The Wall Street Journal revealed last week that about twenty soldiers from the US Navy have been sent to the island to train ground forces.
The Chinese pressure is of great concern to the Taiwanese authorities, and the defense is on its toes.
“The situation now is the darkest since I entered military service over 40 years ago,” Taiwan’s Defense Minister Chiu Kuo-cheng told the island’s legislature on Wednesday, according to AFP.
Taiwan has never formally declared independence from China. The two parties have lived separately since the Communists won the Chinese Civil War in 1949.
Over the years, a thriving technology environment has developed on the island, which is otherwise poor in natural resources. The specialty of Taiwanese industry is the extremely demanding production of the most complex computer chips.
The world economy is completely dependent on computer chips. They are critically important components in virtually all sectors – energy, healthcare, consumer electronics, manufacturing, defense and transport, to name a few.
The value of production in Taiwan in 2020 was, according to Taiwan News, 3.220 billion Taiwan dollars. The sum corresponds to just under NOK 1,000 billion.
The growth from the previous year was as much as 20.9 per cent. The Taiwanese research center ITRI expects growth of 8.6 percent in 2021.
The United States’ share is falling
The scarcity of computer chips that has emerged in the wake of the pandemic has seriously put the focus on the world’s dependence on Taiwanese suppliers. The Taiwan Semiconductor Manufacturing Company (TSMC) is in a special position.
The actual design of the pieces is often done in other countries, the USA is among those that are the market leader here. But when it comes to producing the hyper-advanced chips, companies like Apple, AMD, Nvidia and Broadcom are turning to Taiwan.
A report published by the White House in June states that the United States does not produce any of the most advanced chips on its own keel. These are usually main processors for use in computers and mobile phones.
In this category – so-called 10-nanometer technology or lower – Taiwanese manufacturers have 92 percent of the market.
The United States’ share of the computer chip market in general has fallen from 37 percent in 1990 to 12 percent today. Without a strategy to reverse the trend, the share will fall further, the US report states.
In 2020, chip makers in Taiwan accounted for over 60 percent of the industry’s global sales, according to figures from research firm TrendForce, quoted by CNBC. The company, which is based in Taipei, estimates that TSMC alone has 54 percent of the world market.
Another important producer country is South Korea, where Samsung is the largest manufacturer.
Manufacturers in other countries have over time become smaller players in the market, although many want an increased degree of self-sufficiency. It has become increasingly demanding and expensive to keep up, and market winners are left with the majority of global sales.
China is struggling
China is also unable to keep up.
Semiconductor Manufacturing International Corporation (SMIC) is the largest Chinese player, and figures from TrendForce show that the company is the fifth largest computer chip manufacturer in the world, in terms of turnover – behind TSMC, Taiwanese UMC, Samsung and US GlobalFoundries.
However, the Chinese company is struggling to acquire the technology it needs to compete in the real top tier. In 2020, President Donald Trump’s government put the company on a blacklist that prevents it from buying important equipment from the United States.
According to Reuters, the US government has also pressured the authorities in the Netherlands to stop the sale of advanced equipment to SMIC. The campaign is said to have started in 2018, after the Dutch company ASML got the green light to sell equipment to China. The company produces machines for so-called nanolithography, a central part of the production process for computer chips.
The sale is said to have been stopped after high-level officials in the US government raised the matter with Prime Minister Mark Rutte.
But even if SMIC should get the equipment they want, analysts believe that they have a long way to go to be able to seriously compete with companies such as TSMC and Samsung, which have the best technology.
“It will take years before the company can produce top-level computer chips in large quantities,” Paul Triolo of the consulting company Eurasia Group told CNBC earlier this year.
Thus, most indications are that Taiwan’s dominance in the critically important sector will continue for the foreseeable future.
The big question is what will happen if China tries to secure control of Taiwan militarily.
TSMC’s chairman Mark Liu took the magazine by the mouth and mentioned the fear of war unusually directly in July. He said according to Reuters that the pandemic has been devastating enough in the first place, and that no country wants more instability around Taiwan.
– When it comes to a Chinese invasion, I would say that everyone wants peace in the Taiwan Strait. The reason is that all countries benefit from it, but also because of the supply chains for the semiconductor industry in Taiwan – no one wants to disturb them, Liu said.