The New York Times wrote: The chip giant is rapidly going global, but cannot break with its Taiwanese roots

While the chip wars are gaining momentum on a global scale, TSMC, which has its roots in Taiwan and has no alternative in the world, is a technology giant caught between the USA and China. On the one hand, TSMC, which has established a production base in some countries, including the USA and Germany, on the other hand, cannot break away from its roots in Taiwan.

Taiwan Semiconductor Manufacturing Co., which produces the world’s most advanced microchips. The company ( TSMC ) operates on the island of Taiwan , located in the middle of one of the most geopolitically volatile places on the planet. This situation makes those in Washington very nervous. Because TSMC, which dominates the semiconductor industry, is located in Taiwan, 80 miles from China, and is an indispensable company for the USA.

The US government has allocated tens of billions of dollars to strengthen America’s own semiconductor industry and help TSMC finance its start-up operations in the United States . But TSMC has taken deep roots in Taiwan, investing billions of dollars over nearly 40 years. Here, he employs a small army of engineers, research and development team, technicians and production workers in the highly complex task of producing chips by etching electronic paths smaller than a cell onto silicon wafers.

Hard to emulate TSMC

TSMC President Mark Liu said that it would be extremely difficult to imitate what TSMC is building in Taiwan, adding that a great deal of effort is required to quickly develop and manufacture the company’s cutting-edge chips. Liu said that it takes about 3,000 research scientists to fully master the technology.

TSMC opened up to the outside world

TSMC embarked on a global expansion operation by building two factories in the United States and a facility in Japan , as well as a prospective facility in Germany . This is part of the company’s strategy to respond to calls from US officials to reduce America’s dependence on chips made in Taiwan.

Liu, 68, holds doctorates in electronic engineering and computer science, and is a diplomat as well as a scientist and administrator. After stints at Intel and Bell Labs , he joined TSMC 30 years ago, rose to become CEO of the company today. Liu runs the $500 billion company with vice president CC Wei.

Good relations with the USA

When Liu spoke to The New York Times at TSMC’s office in the northern Taiwanese city of Hsinchu at the end of June , Liu had just returned from a trip to the United States, which he said he visited approximately every three months. “We have a pretty good relationship between Congress, the Department of Commerce and the White House,” Liu said.

TSMC has no alternative

However, this definition by Liu is a bit of an understatement. Initial efforts to court TSMC and bring its manufacturing facilities to the US led to the creation of CHIPS and the Science Act, a program to expand the US semiconductor industry . TSMC’s leadership in the industry is so sharp that there is no obvious second choice for everything it does. Any conflict with Taiwan, where the vast majority of its production takes place, could halt the flow of TSMC microchips, deeply freezing the tech industry and thus the global economy.

No phone in the company

As befits a company obsessed with maintaining its hard-won technological leadership, TSMC’s offices are more like a secret government research facility than a Silicon Valley campus. A sign next to the turnstiles where employees have their badges read says five people have been fired since 2010 for violating the company’s strict internal security rules. One of the crimes was inappropriately changing the subject line of an email in a reply email. Talking on the phone from outside is also prohibited. While policies have been relaxed recently, employees say they ate lunch in the parking lot to get access to their personal phones.

working 24/7

Windowless buildings the size of airplane hangars work 24 hours a day to manufacture the tiny brains, microchips, inside smartphones, airplanes, supercomputers and just about everything electronic. Political leaders in the United States and their allies in the trade war with China have forced TSMC to establish manufacturing facilities outside of Taiwan. China has worked hard to compete with TSMC, using everything from hacking and intellectual property theft to hundreds of billions of dollars in investments.

Ties broke with Huawei after US pressure

As the United States sought to thwart China’s advances in semiconductor technology, TSMC was caught in the middle. In 2020, TSMC cut its orders to Chinese technology giant Huawei , which was TSMC’s second largest customer at that time . Liu said that TSMC has no other choice as it is dependent on American technology. “This is understandable, but with or without support, we have no say,” Liu said.

China and the US need chips

According to Liu, Taiwan’s skill in chip manufacturing deters China’s military action and gains support from the United States. Both need Taiwan’s chips. Expressing that China will not invade Taiwan because of semiconductors, Liu said, “It really depends on the USA and China: How will they maintain the status quo that both sides want?” he said.

TSMC has invested $40 billion in Arizona to build two factories to manufacture chips that are a generation or two behind their most advanced chips . Liu said the company is expected to submit its application for CHIPS Act subsidies this month. The Arizona facilities are moving slowly, and the company has commissioned hundreds of Taiwanese technicians to speed up the process. Last month, it pushed the expected start date back one year to 2025 and faced high costs and managerial challenges. Internal tensions arose between TSMC and American workers due to cultural differences.

The cost is four times higher at the Arizona base

There are doubts as to whether American companies will be willing to pay the likely premium required for TSMC’s chips only made in Arizona, where construction costs could be at least four times higher than in Taiwan. Liu said he told the U.S. government that it should offer incentives beyond the $52 billion subsidy in the CHIPS Act to American companies to purchase American-made chips.

“Otherwise, this will be limited. So this issue is on the table. But I don’t think we have found a solution yet,” said Liu. The Department of Commerce, which is responsible for administering CHIPS Act incentives, declined to comment on specific companies.

Liu said that in 2018, the Department of Commerce under President Donald Trump urged TSMC to invest in the United States. Several TSMC customers approached Liu privately at an industry conference and expressed the need to establish a manufacturing presence in the US. Liu felt that the atmosphere was changing.

It’s time to globalize

Liu said, “I thought maybe it’s time for TSMC to globalize a bit, because I know our technology is leading today, but what about the future?” said.

Not long after, the Trump administration’s State Department emphasized the role of advanced chips in military equipment such as the F-35 fighter jets, citing national security reasons. Management; Keith Krach, Under Secretary of State for economic growth, energy and the environment, arranged a phone call between Liu, Secretary of State Mike Pompeo, and Secretary of Commerce Wilbur Ross.