Yesterday I mentioned that, in the light of Chinese belligerence towards Taiwan:
If I were a US manufacturer reliant on computer chips from Taiwan, which makes about half the world’s supply, I’d be begging, borrowing and stealing any and all supplies I could get out of there before the invasion.
Reader Andrew D. sent me the following comment via e-mail. He’s allowed me to share it with you.
I thought you might be interested in an assessment of the likely future acquisition of Taiwan by China from a different perspective.
I am an electrical engineer, and work in the particular niche area of designing integrated circuits. Every part I’ve worked on in the last 25 years has wound up being fabricated at TSMC. They aren’t ‘just a chip company’. They are the 800-lb gorilla in the IC industry. They make a huge fraction of the world’s chips, and have gotten to that position because they are very, very good at what they do. We haven’t used the TSMC factory because we like them, but because they are so good at what they do that they are the compelling option. They consistently deliver product on time and to specification.
When people talk about Taiwan, I occasionally hear them mention TSMC as a minor concern. From my perspective in the electronics field, China acquiring Taiwan is a minor concern, but China acquiring TSMC would be world-shattering.
Chip foundries are incredibly expensive, and it takes a bunch of highly skilled people to get one working. Not only are they expensive, but the equipment is very fickle. Fickle as in ‘the three secret factors that affect this ion implanter are the barometric pressure, the phase of the moon, and the mood of your mother-in-law.’ Without both motivated and experienced workers and equipment in good condition, there is no working fab.
If China invades Taiwan, then you can be fairly certain that some fraction of the TSMC foundries will be shut down, either by accidents on the part of the Chinese military, or action on the part of Taiwanese partisans. Drop a bomb on a fab and you might as well just build a new one from scratch.
Pretty much everything electronic that you own that has one or more chips in it fabricated at TSMC. Even if most of the ICs come out of Samsung or Hynix, there will almost always be at least one part from TSMC. If you have 99 of the 100 chips needed to make an iPad, then you can’t make an iPad. If China takes over Taiwan, then they will basically control the entire world’s supply of electronics.
Particularly for the newer fine-line processes, building a fab line involves many billions of dollars and 3-5 years of construction. Getting one running well requires hundreds of workers highly skilled in very specialized areas. Even if we had the committment and available experience, it would be years before we could have any alternatives to TSMC.
In short, my assessment is as follows. If China invades Taiwan, then:
1) In the immediate future the supply of basically everything dependent on electronics (TV’s, microwaves, automobiles, air conditioners, computers, etc.) will dry up.
2) If we are lucky and not much of TSMC is damaged, then we might start getting new electronic-dependent products in 6-12 months
3) If we are not lucky and the TSMC fabs are destroyed, then we might start getting new elecronic-dependent products in 5-8 years
4) If China has control of a functional TSMC, then:
a) they will be able to control who gets what when it comes to electronic-dependent products (which is basically everything)
b) every company that manufactures parts through TSMC will have to decide whether they want to provide the Chinese government with their intellectual properties
5) Alternative fabs will get constructed in other companies, and in 5-10 years we will start having other options than TSMC.
Sobering stuff, isn’t it? Thanks, Andrew, for sharing that with us.