At first glance, TSMC’s (Taiwan Semiconductor Manufacturing Corporations) plan to build and expand its chip manufacturing foundries overseas in Japan and the US looks like just another routine business expansion. But, there might be other reasons for this expansion apart from pure business.
Until 2020, it looked like TSMC had no plans to leave its home country except from few production facilities that were setup in Singapore and Washington. However, with geopolitical issues growing between major countries be it communist China vs TSMC’s home country Taiwan or Russian Invasion of Ukraine is now pushing TSMC to grow overseas.
TSMC’s Overseas Expansion Plans
Because of the aforementioned reasons as well as to protect its client companies and the global chip supply chian, TSMC is actively pursuing to expand its chip making Fabs overseas be it in west, europe or the Asian subcontinent.
In the west, TSMC is expanding in United States as it broke ground on a $12 billion plant in the US in June last year that is scheduled to start producing 5-nanometer chips in 2024. Whereas, TSMC is already in talks with Germany to expand its chip fabs in Europe and plans to invest $44 billion of capital.
As for the Asian subcontinent, TSMC has invested $7 billion in Japan as a joint venture with Sony that is scheduled to start producing 22 and 28-nanometer chips starting by the end of 2024. Apart from that, India is being seen as a new frontier for investment with TSMC wanting to set up its new semiconductor manufacturing plants in India, with investment equalling to $7.5 billion.
Main Intention of China
As you might know, China is actively perceiving plans to invade Taiwan as we have seen in the past year with China illegally entering the Taiwanese airspace while also unanimously declaring the island as a Chinese territory.
However, the main intent of China isn’t increasing the already very large Chinese territory but to get hold of Taiwan’s chip making prowess. Once acquired, apart from helping it to develop its own tech industry, China can put major sanctions on exports of semiconductors to its western counterparts; potentially disrupting the already weak chip supply chain.
This move is a direct effect of Donald Trump’s administration labelling China as a strategic competitor while putting ban on major Chinese companies such as Huawei and forcing American companies such as Google to end their business relations with Huawei on terms of spying and threat to homeland security.
Effects on Global Economy
Anytime a war occurs, the participating countries always require immense amount of money with direct effect on their respective economies and in this case the ramifications can be really damaging to the world economy at a much larger scale than even the financial collapse of 2008.
Firstly, if Taiwan ends up being invaded China it will definitely not be great for its citizens as well as TSMC. TSMC is so deeply integrated into the global tech industry that even tiny issues can lead to huge ripples throughout the global economy with major companies such as Apple, Qualcomm and many more depending on TSMC for their chip supply.
Secondly, Chinese economy is also very deeply integrated into the world economy as it a manufacturing hub and exporter as part of global supply chains and a huge consumer of many nations’ raw commodities.
Whatever the case is, this really shows us that the main intent for TSMC’s overseas expansion is due to the risk of interventions from China and to maintain a stable supply of semiconductors.
What are your thoughts on the growing geopolitical tensions between China and Taiwan, and its effects on the global chip supply chain? Let us know in the comment section below. Until then, join us on Telegram, Facebook, or Twitter and stay up to date with the latest happenings in the tech industry.