The chip shortage continues. The world market leader for semiconductor contract manufacturing is the company TSMC from Taiwan. With that, the island’s security suddenly gets a total new meaning. Taiwan Semiconductor Manufacturing Co. is considering building a semiconductor factory in Germany. The company is in the early stages of talks with the federal government, the Bloomberg news agency recently reported. Various factors such as government subsidies, customer demand and the talent pool will influence the final decision, said Lora Ho, senior vice president of Europe and Asia Sales, on the sidelines of a technology forum in Taipei. Until recently, hardly anyone knew the chip world market leader from Taiwan TSMC . Its products are hidden without a name in products from brand manufacturers: cars, smartphones, game consoles, household and consumer electronics. But today TSMC is representative of an economic and increasingly geopolitical problem in the West: the dependence on primary products from other countries. This is not a problem as long as the supply chains function well. But that’s exactly what they’re not doing: semiconductors and chips, for example, are scarce all over the world. Since the end of 2020, cars have not been able to be built as planned, the PS5 game console has not been on the table as promised, and other tech products are also affected.
What does all of this have to do with TSMC and geopolitics? The company from Hsinchu in northwestern Taiwan is the world’s largest contract manufacturer for semiconductors. According to Bloomberg, it holds around 53 percent of the world market for order chips. TSMC customers include Apple, Qualcomm, Intel, Sony, Nvidia and AMD. US Secretary of Commerce Gina Raimondo complained a few days ago: “We are currently not producing any of the most advanced semiconductor chips in the world in America. We buy 65 percent of these chips from Taiwan. ”Taiwan is TSMC. A Taiwanese company has never been so obviously important to the global economy. And that’s why the political fate of the island is in the focus of Europe and the USA like never before. The Chinese Communist Party * has claimed Taiwan as part of the People’s Republic since the end of the civil war in 1949. Every state that wants to cooperate with China must recognize Beijing’s “one-China principle” *. Relations between the West and Taiwan, which has been democratically ruled since the mid-1990s, are therefore informal, and the island has been excluded from most international organizations. China has been rattling its sabers more and more since the democratization of Taiwan. Missiles aimed at the island are located on its East coast. In recent months, Chinese fighter jets have repeatedly penetrated the so-called Air Defense Identification Zone (ADIZ), which is far larger than Taiwan’s airspace and extends to the coast of China. Taiwan’s President Tsai Ing-wen therefore wants to strengthen the defense preparedness.
The Taiwan Strait has been considered one of the most dangerous hotspots in the world for many years. Military experts repeatedly deny an imminent invasion of China. This has so far not changed anything in terms of Taiwan’s status in the world. But now Taipei is feeling stronger. And it owes it – in addition to the anger in the West about China’s aggressive behavior in the Indo-Pacific * – not least to TSMC. It is clear to the EU and the USA: In the event of instability or even war in the region, this crucial source for the chips could dry up. Washington and Brussels are starting to support Taipei and are considering previously unknown formats for cooperation.
US President Joe Biden * recently reiterated his support for the island – if necessary with military means. In November, the United States also announced that Taiwan would participate in the work of the United Nations * in a “meaningful” way.Representatives from Taiwan were also invited to the Summit of Democracies. In Europe, the EU Parliament and small Lithuania are the biggest sponsors of the island, which is only recognized diplomatically by a few small states. The EU Parliament recently recommended that the EU Commission prepare a so-called impact assessment for an investment agreement between the EU and Taiwan as a first step. A similar agreement with China called CAI has been on hold for months because of a sanctions dispute over the human rights situation in Xinjiang. In the autumn, Taiwan’s Foreign Minister Joseph Wu traveled through Europe for days and met representatives from several member states as well as EU parliamentarians. EU Commission Vice President Margrethe Vestager also spoke out in favor of deepening relations with Taiwan – albeit within the framework of the “one-China policy”.
Conversely, Taiwan is also asking for further support. In October, the government warned that cross-strait peace was essential to ensuring the world’s continued supplies of chips. Taiwan’s Minister of Economic Affairs, Wang Mei-hua, made it clear at the time that, in the wake of globalization, Taiwan had contributed to promoting an ecosystem for chip production for more than three decades. „The world community should take Taiwan’s security more seriously,“ warned the minister. Only then could Taiwan “continue to offer everyone a stable service and be a very good partner for everyone”.
Europe needs Taiwan not least because it has maneuvered itself into the chip trap. According to the technology magazine Verdict, Europe was still a major player in chip production in the 1990s, with a 44 percent share of the world market. In 2020 the proportion was a sad nine percent: Asia simply manufactured semiconductors cheaper. And industrial policy to promote individual sectors was not exactly in vogue for decades. And according to a current study by the management consultancy Roland Berger, the shortage of semiconductors will probably continue beyond the year 2022, especially for the automotive industry. In March, the EU Commission * therefore announced a chip offensive: by 2030, they want to produce 20 percent of the world’s chips again. According to Bloomberg, the EU wants to produce faster chips than the smallest, most efficient 5-nanometer semiconductors from TSMC and South Korean Samsung Electronics.
The strategy is in progress and should be presented in the first half of 2022. A first success: In September Infineon opened its 1.6 billion euro chip factory in Villach, Austria. The plant produces chips on 300 mm wafers that are thinner than a human hair. Other European hopes are Bosch and STMicroelectronics. Or just TSMC. The USA also want to strengthen the domestic chip industry. A corresponding law called the „Chips Act“ is currently being negotiated in the US Congress. Minister Raimondo also promised foreign companies such as TSMC subsidies from the 54 billion US dollars provided for in the „Chips Act“ in immediate aid if they set up factories in the USA: „And that’s what TSMC plans to do.“ So far, the company has mainly produced in Taiwan itself. But TSMC is currently building a $ 12 billion facility in the US state of Arizona. The construction of a factory in Japan will also begin shortly.
So now Europe should follow. In March, TSMC boss Mark Liu dismissed Europe’s chip plans as „unrealistic“. But in July, Liu informed its shareholders that TSMC had started evaluating a possible production site in Germany. The result of the talks with Berlin is still pending. Taiwan is also considering cooperating with three Eastern European countries – Slovakia, the Czech Republic and Lithuania. „Many countries can play different roles in this,“ Kung Ming-hsin, Taiwan’s head of the National Development Council, recently told journalists. Taiwan will form working groups with the three countries to explore semiconductor cooperation. The potential chip investment in the three Eastern European countries is possibly a kind of Taiwan for Covid-19 vaccine donations and political support despite strong pressure from China.
The latter mainly affects Lithuania. Ever since the country allowed a „Taiwan office“ to open in Vilnius in August, it has been paying a heavy price. Because Beijing reacted agressively: The Lithuanian ambassador was expelled from the country, food imports and rail transports stopped. Lithuania recently disappeared from China’s electronic customs system for the time being. Reuters also reported that companies exporting to China from various countries were warned by Beijing to remove all intermediate products from Lithuania from their goods. Otherwise they would not be allowed to export them to China. For security reasons, Vilnius has just brought all employees of the embassy in Beijing back home. Beijing had downgraded relations at the chargé d’affaires and now wanted to strip the diplomats of their status. Lithuania therefore feared for the immunity and security of these employees.
The case of Lithuania shows that China makes its threats seriously – at least when dealing with small, supposedly weaker countries. Beijing repeatedly uses economic pressure and coercive measures against states that, in its view, are not behaving properly. It is true that the entire EU or the USA are much more important for China than Lithuania. Nevertheless, neither Brussels nor Washington want to be forced to get the majority of their chips from the People’s Republic, with all the possible consequences. By the way, China is also building a modern chip industry. Because the semiconductors are missing there too. TSMC is also investing there. Years of globalization euphoria, engagement politics, neoliberal shareholder capitalism and profit maximization through cheap production, just-in-time production without warehousing, the lack of an industrial policy of the West has now led to this state of affairs that the One-China policy is now in contrast to a so-to-speak One Chip Policy or One Cheap Chip Policy.