Hutong Cat | Taiwan's chip industry is a core component in the China-US tussle

The chip industry in Taiwan accounted for 15% of its Gross Domestic Product (GDP) in 2018 and the percentage may further reach over 20% in 2022, the Taipei-based Isaiah Group, which calls itself a boutique research firm focused on the tech industry including semiconductors, told Hindustan Times.

“The very first manufacturing unit was set up by UMC (United Microelectronics Corporation) in Hsinchu, Taiwan in 1980. During the period from the 1970s to 1980s, the Taiwan government aggressively supported the semiconductor industry and — in turn — the returns of the technology-driven industry helped to (further) build the semiconductor sector in Taiwan,” Lucy Chen, vice president of Isaiah Research, said.

In the event of an invasion and disruption of the semiconductor supply chain, the impact will be felt globally. “If there is a risk of Chinese invasion in Taiwan, we believe it may be quite tough for the global economy and technology.

Viewed from this angle, the semiconductor capacity of TSMC and UMC accounts for more than 60% in the world, which means any invasion or risk to Taiwan may have a global impact rather than a regional one, unless the technology and capacity can be well transferred to other countries in advance,” the Isaiah group said in a report shared with HT.

“Secondly, (companies like) Apple, AMD, MediaTek, Broadcom, Nvidia, and Qualcomm all have high percentages of wafer input in TSMC. If the above IC design houses have no sufficient capacity to manufacture their chips, numbers of downstream EMS (electronics manufacturing service) providers in China for Apple/Android smartphones and notebooks may also suffer the brunt due to the lack of IC chips. It will lead to ripple effects on the technology industry,” the report said.

“Actually, we see China’s semiconductor industry growing slowly in developing advanced technology as it is limited by US sanctions. However, we also see the recent escalation of the US-China trade war accelerates the process of semiconductor localisation in China,” Isaiah Group’s Lucy Chen said.

Published by Hindustan Times in Aug 8th, 2022.