Trillion-Dollar Milestone
Taiwanese semiconductor titan TSMC briefly joined a rarefied club of companies valued at more than $1 trillion on Monday. With most of its factories based in Taiwan, TSMC is well-positioned to reap the rewards of the AI frenzy.
MIT and Stanford graduate Morris Chang founded TSMC in 1987 after an extensive tech industry career in the United States. Taiwan’s government aimed to establish a semiconductor industry to compete with leading countries like Japan. Over nearly four decades, TSMC has become a global leader in producing chips that power everything from smartphones to advanced robots. Chang, born in mainland China in 1931, retired from TSMC in 2018 and is revered as the “godfather” of Taiwan’s chip industry. In April, Taiwan awarded him one of its highest medals of honor.
Riding the AI Boom
The revolution in artificial intelligence, sparked by the success of ChatGPT, has driven massive demand for TSMC’s advanced semiconductors needed to train and run AI apps. TSMC works closely with AI leader Nvidia, which became the world’s most valuable traded company in June with a market capitalization of around $3.3 trillion. TSMC also supplies Nvidia competitors Qualcomm and AMD, and such is the demand for its chips that production is reportedly booked years in advance. Arguably its best-known client is Apple, which relies on TSMC chips for the latest iPhones and MacBooks. “We have established a research pipeline for technology to enable leading-edge AI devices, circuits, and systems for decades to come,” TSMC states on its website.
Concerns About China
Taiwan is a crucial link in the global semiconductor supply chain, and TSMC is its crown jewel. However, China claims the self-ruled island as its territory and has not ruled out using force to bring it under control. Beijing’s increased pressure on Taipei, including large-scale military drills, has sparked concerns in capitals and boardrooms worldwide about Taiwan’s chip industry. US Commerce Secretary Gina Raimondo told a Congressional hearing in May that a Chinese invasion of Taiwan and seizure of TSMC would be “absolutely devastating.” “Right now, the United States buys 92 percent of its leading-edge chips from TSMC in Taiwan,” she said.
US and Japan Expansion
TSMC has faced pressure to diversify away from Taiwan to guard against further escalation of the US-China tussle. It is building two manufacturing plants in the United States, with plans announced for a third in April, bringing its total investment in Arizona to $65 billion. However, its US projects have faced obstacles in the past year due to a lack of specialized human resources. TSMC also launched an $8.6 billion plant in Japan this year, a coup for the country as it vies with the US and Europe to woo top chip firms with huge subsidies. With strong Japanese government support, TSMC has announced a second factory to make more advanced chips and is planning a new factory in Germany—its first in Europe.
Earthquake Threat
Geopolitics isn’t the only concern for TSMC and Taiwan’s chip industry. The island is also prone to natural disasters. Taiwan sits on the “Ring of Fire,” an arc of intense seismic activity along the Pacific Rim, and has a history of catastrophic earthquakes. TSMC was one of the firms that halted production due to a 7.4-magnitude earthquake in April this year, the most severe to hit Taiwan in decades. The impact from the quake was minimal, thanks to TSMC’s investment in seismic resistance features at its facilities, including an earthquake early warning system.
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