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What Taiwan risk? Island’s chipmakers embark on $120bn buildup

  • June 14, 2022
  • , Nikkei Asia
  • English Press

YU NAKAMURA and HIDEAKI RYUGEN, Nikkei staff writers


TAIPEI — Taiwan’s chipmakers have launched an unprecedented investment spree worth around $120 billion that will strengthen their grip on the global market, even as the U.S. warns against overreliance on an island at risk of a Chinese invasion.


Southern Taiwan Science Park was a hive of activity in late May. Trucks rumbled along the road, hauling in materials like steel beams for the forest of cranes building ever more chip factories at the site.


The industrial park in the city of Tainan began as a production hub for Taiwan Semiconductor Manufacturing Co., the world’s leading contract chipmaker. It is home to some of the most advanced chip fabs in the world, producing processors for Apple iPhones.


TSMC has just completed four new facilities in the area. Still hungry for capacity, the company is now building four more fabs there for production at the cutting-edge 3-nanometer level. Each of these locations will cost around $10 billion.


“Look around. We’re in a rush to finish construction at this TSMC site, too,” said one construction worker, laboring in temperatures around 35 C. “Everyone here works overtime until late at night, and we come in on holidays, too.”


This construction boom extends beyond TSMC and the city of Tainan. At least 20 new factories are under construction or recently completed across the island, Nikkei research shows, stretching from New Taipei City in the north to Kaohsiung in the south. Builders include foundry United Microelectronics Corp. and memory chip maker Nanya Technology.


These projects together represent over 2 million sq. meters of floor space — the size of more than 40 baseball stadiums.


No other place in the world is seeing such a buildup of chipmaking capacity. Investments for TSMC’s planned U.S. plant in Arizona and its proposed plant in Japan’s Kumamoto Prefecture will cost $12 billion and $8.6 billion, respectively. Kumamoto lies on the island of Kyushu, which is about the same size as Taiwan.


Taiwan already leads the world in chip production and accounts for over 90% of all capacity in advanced semiconductor devices, data from the Semiconductor Industry Association and other sources shows. The remainder is found in South Korea.


Some U.S. policymakers argue that an overdependence on Taiwanese chips creates a global supply chain risk. President Joe Biden signed an executive order to bolster American supply chains for semiconductors and other critical industrial inputs in February 2021 amid a growing chip shortage.


Washington has since reached out to Taiwanese companies and authorities, inviting them to invest in the U.S. and build alternative supply chains. But the talks have made slow progress as the strategic nature of the semiconductor industry renders quick decisions difficult.


Semiconductors are the one topic on which Taipei can engage with Washington on an equal footing, and making concessions too readily would give up that diplomatic leverage. Despite — or perhaps because of — the geopolitical risks the island faces, Taiwanese are hoping to keep as much domestic chipmaking capacity as possible.


“With so much semiconductor production concentrated in Taiwan, the world can’t just abandon it,” said a source in the island’s chip industry.

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