The tiny island off the coast of South-East China has never been short of controversy in global headlines. Its unique relationship between the two powerhouses of the world, China and USA, has seen the self-ruling democratic island constantly sandwiched between the power-struggles of the two largest economies in the world.
When elephants fight, ants die.
Taiwan’s political struggles with China, combined with its constant tug-war on cementing global exposure and independence, means that it must continuously strike a delicate balance between being discrete and eloquently vocal. However, one must not underestimate the pivotal role that the Island Nation with a population of only 23 million plays on the global economy.
The unique geographical positioning of Taiwan means that gaining control would bring significant benefits to Mainland China in cross-strait trade and investment flows. Taiwan has also consistently maintained its position in the top 20 largest trading partner of the United States, some $30B-$40B value in bilateral goods and services per annum is not something to be taken lightly.
Technology is at the core of everything in the 21st century and even more so now as we move into this new decade. Taiwan is the primary source of advanced integrated circuits and semiconductors in the world. Caught in the crossfire between US and China is the chip titan TSMC (Taiwan Semiconductor Manufacturing Company). TSMC is the biggest pure-play semiconductor foundry in the world and commanded over 2/3 of the global market share in 2018.
Source: Various
Why is TSMC So Important?
TSMC is the world’s largest foundry for making I.C.s for fabless semiconductor companies. It manufacturers over 10,000 different products spanning over 250 different technologies across a selection of approximately 500 different clients and customers. TMSC was also the first to become a pure-play foundry back in 1987 and is the definition of a company dedicated to only fabricating integrated circuits, and to not possess any in-house design capabilities (Companies such as Samsung, Intel and IBM are defined as integrated device manufacturers, otherwise known as an IDM in short, whom both design and fabricate their I.C.s).
What does this mean? In simple terms, TSMC plays an integral role for its customers such as Google, Apple, Qualcomm, Nvidia and even extends as far as U.S. military with the production of programmable chips for Xilinx which are being used in the U.S. F-35 fighter jets (source: Taiwan’s Institute for National Defence and Security Research). It also holds a pivotal role with China and its biggest tech company Huawei, being TSMC’s second-largest customer behind Apple and making up for more than 15% of the annual revenue.
The relationships TSMC holds on both sides will become increasingly complex to manage moving forward, as it could dictate the survival of Huawei as well as becoming a matter of national security for the U.S. should something go wrong. As a result, TSMC is a vital strategic resource for both sides. If TSMC and Taiwan can sustain a neutral game for as long as possible without taking sides while keeping most of its cutting-edge factories domestic, it could end up being the biggest winner, staying safe while having the ability to use its neutrality as leverage.
Nanometre (nm) You Say?
We’ve all heard the jargon before, 14nm or 7nm CPU anyone? In short, the nm (nanometer) measurement refers to the size of the transistors; generally speaking the smaller the transistors, the more power-efficient and computationally capable without overheating. Other added benefits include an increase in density due to a reduction in transistor size, meaning that more cores can fit into the same area resulting in an overall increase in performance.
Even though smaller does not always translate to better, the benefits of refining the technology and the ability to go smaller is still the future. In the context of TSMC, it is the market leader in this field, achieving maturity in its 7nm, 7nm+ (N7+) and scheduled mass production of its 5nm chip designs in Q3, 2020. It is even propelling ahead with its 3nm development, which is planned for mass production in 2022, also declaring that the development on the 2nm process node has begun.
Meanwhile, Samsung, the biggest competitor of TSMC is on track for mass-production of its 5nm chips by the end of 2020 putting it approximately half a year behind, that is, if all goes according to plan.
Source: Companies
The Conflict Between North and South Korea; TSMC The Biggest Beneficiary?
The escalating conflicts occurring between North and South Korea shows little sign that it has climaxed, powering ahead with further threats and redeployment of troops near its borders.
As the tension intensifies, it places a genuine threat to Samsung’s plans to achieve the mass production milestone of its 5nm chip at the end of the year. North Korea’s threat to the Kaesong Industrial Zone after it blew up the joint liaison office near the border is a sign that anything is possible. Should disruptions occur to Samsung’s mass production target, it will put TSMC well ahead of the rest of the world as it will be the only company capable of mass-producing the 5nm chips, further cementing and prolonging its importance globally.
Tread Carefully but Strategically
Taiwan must tread forward with caution, as it is caught in between the crossfire of 2 economic giants. Taiwan’s semiconductor technology and companies (particularly TSMC) are its trump card, which could very well determine the fate of its very own existence as well as be the influencing factor between the struggle of the giants.
If Taiwan can strategically play to the events of coronavirus pandemic, conflicts between North / South Korea and US-China tensions into its favour with the aid of TSMC as its ultimate leverage, we may finally be able to see a new chapter in Taiwan’s influence and rise to fame globally.
The Future is in Technology
Moving forward, we will see an increasingly pivotal role played by technology and its associated companies. When we mention technology, we synonymously think of the Apples, Googles and Microsofts, however there is a lot more to it than that, as finer components in the technology is equally if not more integral to the end product that we so often see and use in our daily lives. The 21st century is one big battle between economies around the world for fundamental technology like chipsets / semiconductors, all the way across to big data and cyber-security.
TSMC is a good example of a lesser known technology company to an average end consumer that has no choice now but to be involved in a geopolitical battle. The significance and influence it has goes way beyond purely technology as it finds itself embroiled deeply into political disputes, national security, global supply chains and the worldwide battle for the 5G infrastructure.