Semiconductor industry in Taiwan explained

The semiconductor industry, including Integrated Circuit (IC) manufacturing, design, and packaging, forms a major part of Taiwan's IT industry.[1] Due to its strong capabilities in OEM wafer manufacturing and a complete industry supply chain, Taiwan has been able to distinguish itself as a leading microchip manufacturer and dominate the global marketplace.[2] Taiwan’s semiconductor sector accounted for US$115 billion, around 20 percent of the global semiconductor industry. In sectors such as foundry operations, Taiwanese companies account for 50 percent of the world market, with Taiwan Semiconductor Manufacturing Company (TSMC) the biggest player in the foundry market.[3]

Overview

TSMC and United Microelectronics Corporation (UMC) are the two largest contract chipmakers in the world, while MediaTek is the fourth-largest fabless semiconductor company globally.[4] ASE Group is also the world's largest Outsourced Semiconductor Assembly and Test (OSAT) provider.[5]

History

The Taiwanese semiconductor industry got its start in 1974. In 1976 the government convinced RCA to transfer semiconductor technology to Taiwan.[6] Under the direction of Chiang Ching-Kuo the government appointed the Industrial Technology Research Institute (ITRI) to lead the development of the industry with an emphasis on developing commercial products rather than pure scientific advances. ITRI sent four teams of engineers to train at RCA before building a demonstration factory in Taiwan. The demonstration factory was able to achieve higher yields than RCA's fabs in the US. The demonstration factory was spun off by ITRI in 1980 as UMC. UMC received initial investment from both private and public sources.[7]

In 1987, TSMC pioneered the fabless foundry model, reshaping the global semiconductor industry.[8] From ITRI's first 3-inch wafer fabrication plant built in 1977[9] and the founding of UMC in 1980,[10] the industry had developed into a world leader with 40 fabs in operation by 2002. In 2007, the semiconductor industry overtook that of the United States, second only to Japan.[11]

The sector output reached US$39 billion in 2009, ranking first in global market share in IC manufacturing, packaging, and testing, and second in IC design. Although the global financial crisis from 2007 to 2010 affected sales and exports,[12] the industry has rebounded with companies posting record profits for 2010.[13] [14] In 2010 Taiwan had the largest share of 300 nm, 90 nm, and 60 nm manufacturing capacities worldwide, and was expected to pass Japan in total IC fab capacity by mid-2011.[15] [16] By 2020, Taiwan was the unmatched leader of the global semiconductor industry with Taiwan Semiconductor Manufacturing Company (TSMC) alone accounting for more than 50% of the global market.[17]

In the 2020s artificial intelligence processing emerged as a significant demand driver for the Taiwanese semiconductor industry.[18]

Sustainability

The semiconductor industry uses a large portion of the power produced in Taiwan. By 2022 TSMC alone is estimated to consume 7.2% of Taiwan's total power output.[19] Due to pressure from customers and government regulations the semiconductor industry has been switching to green power. In July 2020 TSMC signed a 20-year deal with Ørsted to buy the entire production of two offshore wind farms under development off Taiwan's west coast. At the time of its signing it was the largest corporate green energy order ever made.[20] Much of the switch to renewable energy has been mandated by Apple Inc. whose primary components suppliers are located on Taiwan.[21] [22]

Cybersecurity

The Taiwanese semiconductor industry is one of the top targets of Chinese intelligence activity abroad.[23]

Geopolitics

Taiwanese TSMC and South Korean rival Samsung have near total control of the leading edge of the semiconductor industry with TSMC significantly ahead of Samsung. This situation in which global production capabilities have been concentrated in just a few selected countries leads to significant geopolitical challenges and contributes heavily to changes in global techno-politics.[24]

Due to its significant position in both the American and Chinese tech industry supply chains, Taiwan has been enmeshed in the technological in the China–United States trade war and the larger geopolitical conflict between the two powers.[25] The US prohibited companies which use American equipment or IP from exporting products to prohibited companies in China. This forced Taiwanese semiconductor companies to stop doing business with major Chinese clients like Huawei.[26] [27]

In January 2021 the German government appealed to the Taiwanese government to help persuade Taiwanese semiconductor companies to ramp up production as a global semiconductor shortage was hampering the German economy's recovery from the COVID-19 pandemic. A lack of semiconductors had caused vehicle production lines to be idled, leading German Economy Minister Peter Altmaier to personally reach out to Taiwan's economics affairs minister Wang Mei-hua in an attempt to get Taiwanese semiconductor companies to increase their manufacturing capacity.[28] Similar requests had been made by the United States, the European Union, and Japan. The Taiwanese government and TSMC announced that as much as possible priority would be given to automakers from Taiwan's close geopolitical allies.[29]

In April 2021 the US Government blacklisted seven Chinese supercomputing companies due to alleged involvement in supplying equipment to the Peoples Liberation Army (PLA), Chinese military–industrial complex, and Weapon of Mass Destruction (WMD) programs. In response Taiwanese chipmakers Alchip and TSMC suspended new orders from Chinese supercomputing company Tianjin Phytium Information Technology.[30]

The geopolitical strength of the semiconductor industry is often referred to as Taiwan's "Silicon Shield."[31] According to the New York Times, "Taiwan has relied on its dominance of the microchip industry for its defense," and that, "because its semiconductor industry is so important to Chinese manufacturing and the United States consumer economy, actions that threaten its foundries would be too risky."[32] In 2022 Matthew Pottinger challenged the existence of a Silicon Shield arguing that China does not behave in ways which appear rational to audiences in democratic countries.[33]

International policy measures have been taken in attempts to ensure the longevity TSMC's manufacturing output by third parties such as the United States. Through policy efforts such as the CHIPS and Science Act, the United States and Taiwanese governments have taken steps to bolster TSMC's manufacturing capability on U.S. soil.[34] Such policy efforts were put in place after geopolitical tensions between the United States and China demonstrated a potential weak point in the nation's reliance on foreign manufacturing. Notably, TSMC announced plans to build a $12 billion semiconductor manufacturing plant in Arizona,[35] enhancing their semiconductor production capabilities on international land.

In April 2024, the United States Department of Commerce provided TSMC Arizona with a grant for a total of $6.6 billion in funding under the CHIPS and Science Act.[36] Additionally, the two countries are investing in joint research initiatives and workforce development programs to provide a steady pipeline of skilled workers for the semiconductor industry. TSMC's expansion into the United States has also been met with significant challenges, particularly in its Arizona plant, facing a 1-year delay on its planned operating date.[37] Some TSMC managers have attributed the plant's troubled development to cultural clashes between TSMC's management and American workers.[38]

See also

Notes and References

  1. Web site: Emerging Industries. Taiwan.com.au. 19 January 2011. dead. https://web.archive.org/web/20090915014414/http://taiwan.com.au/Polieco/Industry/Emerge/report01.html. 15 September 2009. dmy-all.
  2. Web site: The Status of the Semiconductor Industry in Taiwan. https://web.archive.org/web/20110827155627/http://sourcing.taiwantrade.com.tw/db/IndustryOverview/15.Semiconductor.pdf. dead. 27 August 2011. Department of Investment Services, MOEA. 19 January 2011.
  3. Web site: Output value of Taiwan's semiconductor sector logged US$115 billion in 2020. Taiwan News. 2021-02-22. 2021-02-21. 2021-07-18. https://web.archive.org/web/20210718043017/https://www.taiwannews.com.tw/en/news/4133393. live.
  4. Web site: 13 Fabless IC Suppliers Forecast to Top $1.0 Billion in Sales in 2010!. IC Insights. 21 December 2010. 19 January 2011. 26 December 2010. https://web.archive.org/web/20101226175010/http://www.icinsights.com/news/bulletins/13-Fabless-IC-Suppliers-Forecast-To-Top-10-Billion-In-Sales-In-2010. dead.
  5. Web site: 2019-04-24 . Top 10 OSAT Companies in World Market Research Blog . 2022-08-12 . Market Research Reports® Inc. . en . 2022-04-11 . https://web.archive.org/web/20220411203306/https://www.marketresearchreports.com/blog/2019/04/24/top-10-osat-companies-world . live .
  6. Web site: Soo . Zen . Tao . Li . Kong Ho . Chua . Taiwan became top chip manufacturer with US help. Can it stay there? . www.scmp.com . 11 September 2019 . South China Morning Post . 17 November 2020 . 5 July 2023 . https://web.archive.org/web/20230705133533/https://www.scmp.com/tech/tech-leaders-and-founders/article/3026766/taiwan-became-top-chip-manufacturer-us-help-can-it . live .
  7. Web site: Huang . Ling-Ming . A SHORT HISTORY OF SEMICONDUCTOR TECHNOLOGY IN TAIWAN DURING THE 1970S AND THE 1980S . taiwaninsight.org . Taiwan Insight . 16 May 2024 . 16 May 2024 . https://web.archive.org/web/20240516010109/https://taiwaninsight.org/2024/05/10/a-short-history-of-semiconductor-technology-in-taiwan-during-the-1970s-and-the-1980s/ . live .
  8. Book: Business Network Transformation: Strategies to Reconfigure Your Business Relationships for Competitive Advantage. Jeffrey Word. 194. John Wiley and Sons. 2009. 9780470528341.
  9. News: Veteran tells story of Taiwan's semiconductor industry. Meg Chang. Taiwan Today. 18 June 2010. 19 January 2011. https://web.archive.org/web/20110830113215/http://taiwantoday.tw/ct.asp?xItem=107417&CtNode=429. 30 August 2011. dead. dmy-all.
  10. Web site: A Silicon Valley of the East: Creating Taiwan's Semiconductor Industry. California Management Reviews. John A. Matthews. 1997. 26. 19 January 2011. https://web.archive.org/web/20110717011745/http://web.rollins.edu/~tlairson/easia/taiwansemi.pdf. 17 July 2011. dead. dmy-all.
  11. News: Taiwan semiconductor output overtakes United States. China Post. 29 October 2007. 18 January 2011. 20 May 2011. https://web.archive.org/web/20110520235459/http://www.chinapost.com.tw/business/2007/10/29/128610/Taiwan-semiconductor.htm. live.
  12. Web site: Taiwan's Semiconductor Industry Records Fastest YOY Growth. RNCOS. 6 January 2010. 19 January 2011. 25 May 2010. https://web.archive.org/web/20100525232054/http://www.rncos.com/Blog/2010/01/Taiwan-Semiconductor-Industry-Records-Fastest-YOY-Growth.html. live.
  13. News: Taiwan's TSMC sales rise more than 40% in 2010. Agence France-Presse. 10 January 2011. 19 January 2011. 26 February 2014. https://web.archive.org/web/20140226121901/http://www.google.com/hostednews/afp/article/ALeqM5hYEUrZ2T1YoJX0w55juhTc-IAHhA?docId=CNG.6581f16764e24f3824cf7a659616dd6d.21. dead.
  14. News: UMC posts record annual sales as foundry picks up. Taipei Times. 8 January 2011. 19 January 2011. 12. 8 October 2012. https://web.archive.org/web/20121008180948/http://www.taipeitimes.com/News/biz/archives/2011/01/08/2003492933. live.
  15. Web site: Taiwan to Pass Japan as Largest Source of IC Wafer Fab Capacity. IC Insights. 10 November 2010. 19 January 2011. 16 November 2010. https://web.archive.org/web/20101116182443/http://www.icinsights.com/data/articles/documents/184.pdf. live.
  16. Book: Developmental State in Transition: The State and the Development of Taiwan's Biopharmaceutical Industry..
  17. Web site: Chien-chung . Chang . Huang . Frances . Taiwan to remain largest semiconductor material market in 2020, 2021 . focustaiwan.tw . Focus Taiwan . 17 November 2020 . 23 September 2020 . https://web.archive.org/web/20200923020522/https://focustaiwan.tw/sci-tech/202009220024 . live .
  18. Web site: Rickards . Jane . AI: New Driver of Taiwan’s Economy . topics.amcham.com.tw . Taiwan Topics . 13 February 2024 . 13 February 2024 . https://web.archive.org/web/20240213230225/https://topics.amcham.com.tw/2023/12/ai-new-driver-of-taiwans-economy/ . live .
  19. Web site: Tsai . Alynne . TSMC's push toward green energy . www.taipeitimes.com . 17 July 2020 . Taipei Times . 16 December 2020 . 19 December 2021 . https://web.archive.org/web/20211219172953/https://www.taipeitimes.com/News/editorials/archives/2020/07/17/2003740051 . live .
  20. Web site: Strong . Matthew . Taiwan chip giant TSMC places world's largest wind power order with Ørsted . www.taiwannews.com.tw . 8 July 2020 . Taiwan News . 8 July 2020 . 10 July 2020 . https://web.archive.org/web/20200710194936/https://www.taiwannews.com.tw/en/news/3962736 . live .
  21. Web site: Murtaugh . Dan . Wu . Debby . Is Apple green? Not until its Taiwanese suppliers cut emissions . www.aljazeera.com . Al Jazeera . 16 December 2020 . 26 October 2020 . https://web.archive.org/web/20201026223456/https://www.aljazeera.com/economy/2020/8/12/is-apple-green-not-until-its-taiwanese-suppliers-cut-emissions . live .
  22. Web site: Yang . Sophia . Taiwan's TSMC set to issue its first green bond . www.taiwannews.com.tw . 24 November 2020 . Taiwan News . 16 December 2020 . 1 December 2020 . https://web.archive.org/web/20201201053957/https://www.taiwannews.com.tw/en/news/4061145 . live .
  23. Greenberg . Andy . Chinese Hackers Have Pillaged Taiwan's Semiconductor Industry . Wired . 17 November 2020 . 22 March 2021 . https://web.archive.org/web/20210322015355/https://www.wired.com/story/chinese-hackers-taiwan-semiconductor-industry-skeleton-key/ . live .
  24. Web site: Lemert . Abby . Runde . Eleanor . Taiwan's Chips Remain Core of Technopolitics . www.lawfareblog.com . 2 February 2021 . Lawfare . 2 February 2021 . 13 January 2024 . https://web.archive.org/web/20240113130647/https://www.lawfaremedia.org/article/taiwans-chips-remain-core-technopolitics . live .
  25. Web site: Micallef . Joseph V. . Why Taiwan Will Be at the Center of the China-US Rivalry . www.military.com . 6 January 2021 . Military.com . 10 January 2021 . 4 March 2021 . https://web.archive.org/web/20210304163513/https://www.military.com/daily-news/opinions/2021/01/06/why-taiwan-will-be-center-of-china-us-rivalry.html . live .
  26. Web site: Lee . John . Kleinhans . Jan-Peter . Would China Invade Taiwan for TSMC? . thediplomat.com . The Diplomat . 16 December 2020 . 16 December 2020 . https://web.archive.org/web/20201216135436/https://thediplomat.com/2020/12/would-china-invade-taiwan-for-tsmc/ . live .
  27. Web site: Sullivan-Walker . Kate . The semiconductor industry is where politics gets real for Taiwan . www.lowyinstitute.org . The Interpreter . 16 December 2020 . 20 December 2020 . https://web.archive.org/web/20201220045550/https://www.lowyinstitute.org/the-interpreter/semiconductor-industry-where-politics-gets-real-taiwan . live .
  28. News: Nienaber . Michael . Germany urges Taiwan to help ease auto chip shortage . www.reuters.com . 24 January 2021 . Reuters . 25 January 2021 . 25 January 2021 . https://web.archive.org/web/20210125032127/https://www.reuters.com/article/us-taiwan-autos-chips/germany-urges-taiwan-to-help-ease-auto-chip-shortage-idUSKBN29T04V . live .
  29. News: Kao . Jeanny . Lee . Yimou . Exclusive: Taiwan ministry says TSMC will prioritise auto chips if possible . www.reuters.com . 25 January 2021 . Reuters . 25 January 2021 . 25 January 2021 . https://web.archive.org/web/20210125093423/https://www.reuters.com/article/us-taiwan-autos-chips-idUSKBN29U091 . live .
  30. News: Taiwan says its chip firms will adhere to new US rules blacklisting China supercomputing entities . www.reuters.com . 14 April 2021 . Reuters . 14 April 2021 . 14 April 2021 . https://web.archive.org/web/20210414075545/https://www.reuters.com/article/taiwan-usa-semiconductors/taiwan-says-its-chip-firms-will-adhere-to-new-us-rules-blacklisting-china-supercomputing-entities-idUSL4N2M70MB . live .
  31. Web site: Huang . Joyce . Can Taiwan's Silicon Shield Protect It against China's Aggression? . voanews.com . 10 May 2021 . VOA . 22 January 2022 . 22 January 2022 . https://web.archive.org/web/20220122224347/https://www.voanews.com/a/east-asia-pacific_can-taiwans-silicon-shield-protect-it-against-chinas-aggression/6205660.html . live .
  32. News: Barnes . Julian E. . How the Computer Chip Shortage Could Incite a U.S. Conflict With China . . 26 January 2022 . 27 January 2022 . 26 January 2022 . https://web.archive.org/web/20220126232308/https://www.nytimes.com/2022/01/26/us/politics/computer-chip-shortage-taiwan.html . live .
  33. Web site: Staff Writer . 'Silicon shield' not enough: expert . taipeitimes.com . Taipei Times . 17 January 2023 . 17 January 2023 . https://web.archive.org/web/20230117185914/https://www.taipeitimes.com/News/taiwan/archives/2023/01/18/2003792799 . live .
  34. Web site: US, Taiwan & Semiconductors: a Critical Supply Chain Partnership . 2024-07-27 . US-Taiwan Business Council . en-US.
  35. Web site: Taiwan’s Semiconductor Dominance: Implications for Cross-Strait Relations and the Prospect of Forceful Unification Perspectives on Innovation CSIS . 2024-07-27 . www.csis.org . en.
  36. Web site: TSMC . TSMC Arizona and U.S. Department of Commerce Announce up to US$6.6 Billion in Proposed CHIPS Act Direct Funding, the Company Plans Third Leading-Edge Fab in Phoenix . July 26, 2024 . www.tsmc.com.
  37. Web site: Intelligence . GlobalData Thematic . 2023-08-30 . TSMC-US industrial relations spat risks turning chips into fools’ gold . 2024-07-27 . Verdict . en-US.
  38. Web site: Schneider . Jordan . Culture Clash in TSMC's Phoenix Fab . 2024-07-27 . www.chinatalk.media . en.

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