TSMC: World’s biggest chipmaker caught in the conflict between US and China

Story Highlights
  • What is TSMC?
  • What is TMSC in the middle of?

One company, located on a teeny-tiny island off the coast of China, manufactures a component used in a wide variety of products, including personal computers and washing machines.

As the people of Taiwan become more anxious about the possibility of a confrontation between the United States and China, the economy of the whole world continues to wait with bated breath. Because Taiwan Semiconductor Manufacturing Company is the biggest chipmaker in the world, the company is responsible for economic activity worth billions of dollars.

What is TSMC?

There is a high chance that you are unaware of the name TSMC, but the probability that you own something that it consists of is higher.

Since TSMC is a foundry, it is developing and manufacturing chips for other companies under contract. These other companies use TSMC’s fabrication facilities. The company has a monopoly over half of the global semiconductor industry and up to ninety percent of the market for high-end CPUs. In addition, they produce more than half of the world’s semiconductors. To put it another way, it is said that TSMC’s chips are at least five years ahead of even the most advanced chip made by SMIC, the most prominent semiconductor manufacturer in China.

Apple, the giant technology company in California, is TSMC’s key customer for the iPhone. According to The Wall Street Journal, TSMC is the manufacturer of most of the world’s 1.4 billion smartphone processors and produces approximately 60 percent of the chips used in automobiles.

What is TMSC in the middle of?

Industry analysts are concerned that a developing dispute between the United States and China over Taiwan could potentially weigh down the global economy because no other sector manufactures semiconductors at such a large volume or with such a high degree of complexity as the semiconductor industry does. According to these individuals, the failure of TSMC would trigger a domino effect in the manufacturing industry, resulting in many consumer goods, including automobiles and iPhones, being unavailable to buyers.

As was seen by the recent coronavirus epidemic and the turmoil in Ukraine, excessive dependency on a relatively small number of countries can lead supply chains to fail in the face of large disruptions. As a result, a significant number of firms based in the United States are mulling over the possibility of “onshoring,” which refers to moving some of their manufacturing to the country itself to improve the dependability of their supply chains.

The United States’ dependence on TSMC chips is in a highly perilous position since China claims Taiwan as its territory and has vowed to invade. Xi Jinping has made it a major priority to exert control over Taiwan to realize the “great rejuvenation of the Chinese people” by 2049, which would mark the centenary of the People’s Republic of China (PRC).

Taiwanese government officials have referred to their country’s semiconductor industry as a “silicon shield” that would repel an invasion from China. If China were to invade, however, and cut off the supply of chips to the rest of the world, the whole economy would come to a complete and total halt.

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