Taiwan deploys a ‘silicon shield' to protect itself from China

Daily Maverick

2 days ago

Taiwan's semiconductor prowess serves, in different ways, to provide a 'silicon shield', protecting the country from the threat of China.
The tiny island nation's superiority in advanced electronics – particularly semiconductors where it is a world leader – help Taiwan's defence in several ways – in making smarter weapons; in building stronger alliances with its allies; in making itself increasingly indispensable to the world economy; and also in greatly boosting its wider economy, providing the revenue to buy better weapons and generally strengthen its resilience.
The Taiwan Semiconductor Manufacturing Company (TSMC), based at Hsinchu, about 50km southwest of the capital Taipei, is perhaps the country's greatest strategic asset. It is the world's largest semiconductor foundry, manufacturing chips on behalf of many customers. It is also one of the top three global companies in any aspect of producing semiconductors.
The modern global economy is largely powered by semiconductors, in the form of microprocessors, memory chips, commodity integrated circuits and complex systems on a chip (SoCs).
The tiny electronic circuits are the brains for millions of devices, ranging from coffee machines and smartphones to cars, space vehicles and missile guidance systems.
Last year, TSMC contributed 7.3% of Taiwan's GDP of $814.44-billion, 13.4% of exports and 12.3% of national income tax.
The competition in semiconductor manufacturing is for greater miniaturisation, to be able to pack ever more circuitry and functionality into ever smaller spaces. Scott Huang, associate researcher of the bureau of the Hsinchu Science Park – where TSMC was founded in 1987 and where it is still headquartered – says billions of transistors are now being squeezed into some chips.
He notes that the smallest commercially available chips have now shrunk to just three nanometres, which is about one 30,000th of the diameter of a human hair. Even tinier chips have been developed in the laboratory.
'Silicon shield'
Taiwan's semiconductor prowess serves, in different ways, to provide a 'silicon shield', protecting the country from the threat of China, he said. 'If not for the semiconductor, I guess China would attack Taiwan much earlier,' he said.
Huang noted that the miniaturisation of chips was critical for developing the kind of smart weapons Taiwan needs to fend off a possible attack from China. He noted that, for example, more sophisticated chips enabled the manufacture of missiles which could take into account more parameters to improve the chances of hitting their targets.
He says Taiwan's advanced semiconductor industry is an indispensable asset not only for itself, but for the world. 'If there was an attack on TSMC, people around the world would not be able to use the smartphone or new model of the iPhone for three years.'
Last week, US Republican Congressman Zach Nunn posted on X that since some 90% of the world's advanced semiconductors were produced in Taiwan, a Chinese blockade or invasion of the island could result in 'economic destruction' across the world on a scale not seen since World War 2, including many 'economic GDP collapses'.
He called for a worldwide assessment of the implications of such a Chinese attack, suggesting that the world was collectively neglecting the threat.
Although the TSMC had now built manufacturing plants in the US, Japan and Germany, its greatest technological expertise was still concentrated in Taiwan. 'So we need the US, Japan and other countries to deter China,' Huang said.
He noted that Beijing was 'always trying its best to steal technology from us', but so far Taiwan had kept it at bay. He said that in 2017 or 2018, China boasted that it would catch up with Taiwan's semiconductor prowess in three years. But then the Trump administration launched a trade war against China, including sanctions on exports of US chips, which undermined its ambitions 'so that it still cannot compete'.
Taiwan's semiconductor prowess is also a platform for strengthening its ties with other democratic allies, helping it to overcome the isolation which it suffers from its inability to join the United Nations – and China's aggressive diplomacy to prevent it joining even functional UN agencies like the World Health Organization – which Beijing rejects as de facto recognition of Taiwan as an independent state.
Taiwan therefore achieves a kind of de facto global recognition by forging ever closer links in the semiconductor field, as was evident when it organised the Global Semiconductor Supply Chain Partnership Forum in Taipei.
Edwin Liu, president of the Industrial Technology Research Institute (ITRI), which hosted the meeting, said, 'Semiconductors are now a core strategic asset in global economic and technological competition, requiring deeply interdependent supply chains.'
He stressed that Taiwan wanted 'supply chain independence from China'. Taiwan's President Lai Ching-te said that 'global democracies must work together … to ensure a resilient semiconductor supply chain'.
Semiconductor, AI and other advanced electronic supply chains are already deeply integrated globally. For instance, the Dutch company ASML Holding has been a key partner of TSMC from the beginning, supplying sophisticated lithography machines used to add circuitry to silicon wafers.
From toys to semiconductors
The extraordinary success of TSMC and other Taiwanese hi-tech companies has not been spontaneous. As with other successful Asian countries such as Japan and South Korea, the Taiwanese government directed the foundation of a hi-tech industry.
In 1975, Taiwanese industry still largely manufactured low-end products such as clothes and toys.
Then Premier Chiang Ching-kuo sent National Science Council chairperson Shu Shien-siu to Japan at the head of a delegation of officials and scientists to study that country's remarkable economic success story.
On his return, Shu proposed the establishment of a science-based industrial park to incubate a hi-tech industrial base that would also foster Taiwan's defence industry. It would hopefully inspire the considerable cohort of technological talent, which had moved abroad, to come home.
In 1980, Hsinchu Science Park was born with the ambitious goal of attracting or inspiring the launch of enough successful companies to collectively contribute at least 10% of Taiwan's GDP.
In 1987, Morris Chang, who had moved to the US and became vice-president of Texas Instruments, specialising in semiconductors, was persuaded by the Taiwanese government to come home and establish TSMC.
His inspiration was to found a company which made semiconductor chips on contract for other companies which designed them. It was a brilliant formula, creating a unique market niche which soon made TSMC the largest semiconductor manufacturer in the world.
Comprehensive ecosystem
Today, the park hosts more than 630 companies, more than 80 of them foreign, producing advanced products in six industries – integrated circuits, opto-electronics, biotech, machinery, PCs and telecoms.
The companies employ more than 178,000 people and last year collectively earned revenue of $47-billion. The park hosts seven universities with 60,000 students, 9,000 of them PhDs, and eight labs.
It is, as Huang put it, a comprehensive ecosystem for the incubation of hi-tech products, where companies and their suppliers, as well as universities, labs and research institutions, and government departments, are all within easy reach of one another.
Hsinchu Science Park has also inspired the creation of 20 more science parks in Taiwan, hosting more than 1,100 companies, employing 328,000 people and earning $148-billion in revenues in 2024 – or about 18% of Taiwan's GDP.
Hsinchu Science Park in particular has incubated household names such as Mediatek, a market leader in complex 'SoC' (system on a chip) for products such as mobile devices, home entertainment, connectivity and IoT ( Internet of Things); Realtek, a leading integrated circuit design house for AI, SoC, and other electronic solutions; and CytoAurora, global leader in single cell research and application platforms.
The semiconductor industry is indeed an extremely complex ecosystem of interdependencies, domestically and globally, which any kind of military interference is very likely to destroy.
That might just be Taiwan's strongest insurance policy. DM