When U.S. Love for TSMC Turns into Doubt
China Times Editorial, October 13, 2022
The Taiwan Semiconductor Manufacturing Company (TSMC) was once the favorite of the United States, and it won numerous kinds of preferential treatments to set up factories in the United States. Today, in order to compete with China, the United States is determined to completely destroy the development of advanced semiconductor technology in mainland China, and has gradually become suspicious of TSMC. The latest ban, issued a few days ago, set three conditions, that all chips using American technology must be approved before they can be sold to the mainland; related technologies are prohibited from flowing into the mainland; and Americans (including Chinese with American passports) are prohibited from working for the mainland semiconductor industry. The first two conditions would make a heavy blow to TSMC's operations and profits, and even two American companies, NVIDIA and AMD, which have a Taiwanese background and work closely with TSMC, have been implicated. According to Financial Times, the harsh sanctions are intended to hit China so that it regresses to the Stone Age.
This is the third wave of the ban on the export of semiconductor products in the United States in four months ranging from the expansion of artificial intelligence (AI), high-efficiency computers (HPC) and supercomputers to computer memory. Most of these advance-processed chips are manufactured to and produced by TSMC. After the announcement of the ban, TSMC’s share price fell for several days, falling below the NT$400 mark on October 12, hitting the lowest price since July 2020. The market value of TSMC has shrunk greatly. In January this year, the market value was as high as NT$17.8 trillion (about US$549 billion), ranking 6th among the world's top 500 technology companies, only behind Apple, Microsoft, Alphabet’s Google, Meta and NVIDIA. Now, with more than NT$7 trillion (about US$217 billion) evaporated, TSMC is trying to defend the line of NT$10 trillion (US$312 billion) in market capitalization. The United States announced a one-year buffer period for Taiwan on the October 13, but the harm has already been rendered.
TSMC: From Irreplaceable “Sacred Mountain” to Tradable “Hos-Jade”
Secretary of the Treasury Janet Yellen attended the "Atlantic Monthly" annual event about three weeks ago. When talking about U.S. economic security issues, she took semiconductors as an example and named Taiwan, saying that Taiwan is the only source of the world's most advanced semiconductors, which has posed a national security risk. Commerce Secretary Gina Raimondo once said that the most elite Javelin missile in the United States uses about 250 advanced chips, of which 70 percent are purchased from Taiwan, and it is not safe (for U.S. national security). Out of this anxiety, the U.S. "Chip and Science Act” and the European Union’s “Chip Act” both clearly stated to ensure the security of the semiconductor supply chain and leading superiority over China in technology and production.
TSMC's advance-processed R&D and mass production commercial capabilities is leading the world. In the first quarter of this year, the revenue of the most advanced 5nm and 7nm productions accounted for 50 percent of the total revenue. A research study by TrendForce, a world leading market intelligence provider, shows that in the first quarter of this year, TSMC's total foundry market share is as high as 53.6 percent, while Samsung's market share has decreased from 18.3 percent in the previous quarter to 16.3 percent. TSMC's dominance in the semiconductor industry, in addition to Taiwan’s geopolitical risks, has caused deep anxiety among Western countries.
TSMC's advanced chips are not only leading opponents, but also the most important source of chips for mainland China. The mainland relies on imports for 90% of its chips, especially the high-end chips required for automobiles, computers, mobile phones, medical supplies and other products. In 2021, Taiwan's chip output to the mainland increased by 24.4 percent, reaching a sales value of $104.3 billion. Chairman Mark Liu of TSMC, in an exclusive interview with CNN in August, said that “If the mainland uses force to attack Taiwan, TSMC will shut down, and it will cause chaos in the Chinese economy.” Liu’s remarks shows that TSMC's ability to protect Taiwan is no less than that of a U.S. aircraft carrier. Western media also often use "Silicon Shield" to describe the protective effect of the semiconductor industry on Taiwan. TSMC was once Taiwan's protector, so-called the “Sacred Mountain.”
At the end of the interview, Liu told CNN with confidence that TSMC can create a win-win situation for the United States, mainland China and Taiwan. Now it seems that such confidence is just too wishful. Not only does TSMC have to bear the impact of a series of ban from the United States, but Taiwan's integrated circuit (IC) design industry, which is dominated by the Chinese market, will also be affected by the American ban. Taiwan's economic growth mainly depends on export sales, while the domestic service industry has been sluggish for a long time. In the past three years, exports have been booming, and the only reliance is on the export of semiconductor products to the mainland. Now, facing two super powers, TSMC’s value has shifted from Taiwan’s irreplaceable “sacred mountain” to the tradable “Hos-Jade”. The changing of TSMC’s value in geopolitics competition is bound to have a major impact on Taiwan's economy.
The United States has become more and more aggressive in containing China's development. It not only guides TSMC to set up factories in the United States, Europe, and Japan, and promotes the outflow of high-end talent, but also prepares to blow up TSMC's plant equipment when necessary. In the future, if Taiwan's semiconductor talents are hollowed out, funds flow overseas, advanced technology companies become empty shells, exports decrease, foreign exchange reserves turn from assets to debts, and the country's competitiveness weakens, then, it will become a failed country, and be destined to fall into the worst result, which is “to be unified without dignity.”
The intention of the mainland China's reunification efforts is still at the stage of “declaration”, and has not caused substantial harm to Taiwan, but the harm the United States has done to Taiwan is immediate and obvious. Taiwan has to rely on the United States in order to “anti-China and protect Taiwan." Yet the United States does not hesitate to harm Taiwan for its own strategic interests. Has Taiwan not woken up yet?
From: https://www.chinatimes.com/opinion/20221013005112-262101?chdtv