(Bloomberg) — A planned move by Taiwan Semiconductor Manufacturing Co. to locate some of its chipmaking facilities overseas will be “very beneficial” for Taiwan because it will allow the chipmaker to work more closely with customers and help it to recruit the best talent, according to a senior government official.
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Fears about the erosion of Taiwan’s industrial leadership as TSMC establishes factories abroad have spread among local commentators and appeared in newspaper op-eds. TSMC is the world’s largest contract chipmaker, with Apple Inc. and Nvidia Corp. depending on it for its most important products, and the island’s centrality in the semiconductor supply chain is seen as an essential element of its international security.
“Our investment in overseas semiconductors is actually very beneficial to Taiwan, both economically and from a security perspective,” said Taiwan Vice Minister of Economic Affairs CC Chen in an interview on May 21. they are close to the best talent, the best and the brightest. And third, they will work with their customers to develop the most advanced and most needed technologies.”
On a similar note, TSMC CEO CC Wei said in 2021 that it is not easy to replicate Taiwan’s chip industry in another country, as TSMC’s success took more than 30 years to build with the help of its suppliers.
Major governments around the world are racing to increase chip production nationwide to avoid a repeat of supply disruptions that cost companies hundreds of billions of dollars in sales. Such efforts also act as a hedge against rising tensions in the Taiwan Strait, with China claiming Taiwan as part of its territory. TSMC and South Korea’s Samsung Electronics Co. have been the most sought-after partners to help with semiconductor development.
Hsinchu-based TSMC has now committed to building three advanced factories in the US state of Arizona, with total investments exceeding US$65 billion, and is scheduled to receive US$11.6 billion in grants and loans from USA for the project. The third U.S. factory is expected to produce chips using 2-nanometer or more advanced technology, with production beginning later in the decade. TSMC is on track to start producing 2nm semiconductors in Taiwan next year.
Chen said the Taiwanese government has granted TSMC approval to manufacture less advanced 3nm, 4nm and 5nm chips in the US, but if the company wants to produce its most advanced chips abroad, the plan must first get the green light from Taipei. Taiwanese authorities will review overseas investments based on national and economic security considerations, he added.
The minister said he cannot predict the government’s decision if TSMC decides to request the launch of its latest technology on US soil, something US officials including Commerce Secretary Gina Raimondo have advocated.
While the U.S. government hopes TSMC will help bring advanced chip manufacturing back to the U.S., the Taiwanese chipmaker has struggled with labor issues. Chen identified managing the Arizona facility as one of the biggest challenges facing the chipmaker.
“They are becoming more internationalized,” he said. “Management information is something they need to gather – how to manage a subsidiary abroad and then how to manage your business or your talents and comply with local regulations and a different culture.”
At a time when Taiwanese companies are diversifying their production lines outside of China, Asia’s largest economy continues to be Taiwan’s biggest trading partner. Chen described this relationship as “mutually beneficial” because the two sides collaborate closely in the global supply chain.
“We think it is good to maintain stability and also have working and collaborative relations in terms of commercial investment with the People’s Republic of China,” he said. “However, we also need to diversify our market and become more resilient.”
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