Leaders in the semiconductor industry in 2030: Taiwan’s era of open borders

According to Sun Tzu’s “The Art of War,” warriors begin battle with their own nation’s resources and subsequently get reinforcements from the opposition. Despite its small size, Taiwan is capable of employing a variety of tactics. We could still learn from the knowledge of 2,500 years ago.

Joe Biden, the vice president of the United States, and Gina Raimondo, the secretary of commerce, all agree that Taiwan has the most sophisticated semiconductor manufacturing techniques and equipment in the world. Morris Chang even predicts that his former foundry, TSMC, could be destroyed in the event of a war across the Taiwan Strait. But does Taiwan actually own TSMC? Remember that approximately 70% of TSMC’s clients are American companies, and that over 70% of the company’s shares are held by foreign investors. Furthermore, TSMC employs a sizable number of American executives. In a sense, TSMC was founded by various international companies.

Through years of work, Taiwan has created an unreplaceable ecosystem, and the participants in its ICT supply chain collaborate, support, and grow one another. The industry that mostly produces laptops, servers, and mobile devices relies heavily on offshore production facilities, although management and investment-related decisions are still made at the headquarters in Taiwan. The new period offers a fresh context for fresh strategic thought. According to the idea of coexistence and co-prosperity in the larger environment, maintaining an excellent position and functioning decentralizedly will provide us the best advantage.

With only 23 million people, Taiwan has come a long way. Taiwan is today viewed as an unrivaled powerhouse in the semiconductor sector, despite the fact that it is still not regarded as a “normal country” on a global scale.

Taiwan sent a team to the United States in the 1970s to learn from RCA at a time when the global semiconductor industry was just getting started. This was akin to the study tour that a Japanese delegation took in the 1870s. The Western culture charmed the Japanese delegation, which is how Japan’s modernization process got started.

More than 20 of Taiwan’s brightest young individuals traveled to the United States in 1974 to study with RCA. A century later, these young people have gone on to become heroes in the growth of Taiwan’s chip sector. The effects of the oil crisis on Taiwan in the 1970s, the rupture of diplomatic ties with Japan and the US, and Taiwan’s exit from the UN all shocked the people of Taiwan. Building a technology park and entering the semiconductor sector at the time were attempts to create change in an environment where little could be done.

Taiwan’s first pot of gold arrived in the 1980s thanks to the expanding personal computer market, and with purchases from merchants all over the world, Taiwan was dubbed the “Republic of Computers.” (‘Republic of Computers,’ my debut book, was released in 1995.) An hour’s drive from Taipei to Hsinchu houses about 90% of the world’s laptop manufacturing facilities, making Northern Taiwan, which is comparable to Silicon Valley, the technology industry’s most densely populated production hub.

Although Taiwan has continued to serve as the operational center, mass production activity was moved to China after 2000. The PC foundation created a business opportunity for Taiwan’s IC design industry to replace imported goods. Additionally, not only the IC design industry is flourishing; the foundry and packaging industries did as well. Taiwan has had a difficult journey, but it has also been fortunate along the way.

The global industrial landscape has changed: China now purchases 80% of the goods produced by Taiwan’s leading IC design firms. Taiwan appears to be heavily dependent on China, but this is not the case. In reality, the assembly plants in China of Taiwanese manufacturers receive the majority of the components produced in Taiwan. The supply structure will change once the production structure does and the production base is decentralized.

Decentralized production systems will become commonplace in addition to the large orders from traditional OEMs as a result of the numerous business opportunities that are opening up for electric vehicles (EV) and smart applications. Additionally, 12-inch wafer fabs, which can cost up to US$7 billion to create each, as well as the manufacturing industries, which require significant land and personnel investments, must be able to meet regional demands. Everyone may benefit most from Taiwan’s ICT sector operating internationally for the sake of the global economy.

In the conversations that follow in this series, we will look into the options.

(Editor’s note: This essay is one of a series that revolves around the US-China trade war but focuses on the challenges that Taiwan, Japan, Korea, ASEAN, India, and other growing Asian nations must deal with in their industrial policies and ICT supply chains.)

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