China halted some trade with Taiwan this month after US House Speaker Nancy Pelosi’s controversial trip to Taiwan. It should be noted that the trade bans did not include electronics. Taiwan is known to be the “home” of more than 90% of the production capacity of the most advanced chips in the world.
Pelosi’s itinerary included a visit with Taiwan Sammy
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, the largest chip manufacturer and in this situation, also the most important in the world. Its products are an integral part of all products, from consumer products to military aircraft. Contrary to what logic says, only 10% of Taiwan Semi’s revenue comes from China, according to the company. More than half of its revenue comes from the United States.
The status quo is that these chip companies don’t depend on China, as much as China depends on them,” said Patrick Chen, head of CLSA’s research department in Taiwan. “I think the real challenges for chip manufacturers stem from the large demand, not from what’s happening geopolitically.”
Further to these statements, in recent weeks the American chip manufacturers Micron and Nvidia have warned against a drop in demand for products in which the chips of the two are included, for example, gaming and mobile computing.
Pelosi’s trip to Taiwan came despite warnings from China, which views the island of Taiwan, democratically, as part of its territory, without the right to conduct foreign relations independently. The US recognizes China as the sole legitimate government of China, while maintaining unofficial relations with Taiwan.
In addition to some trade bans, China has stepped up military exercises across the island of Taiwan, raising concerns about the risk of global access to the chips. Analysts stressed that Taiwan-made chips, especially from TSMC, are too important to the world as well as to China.
“If you look at autonomous drivers, cloud infrastructure, electric vehicles, the next generation of industrial facilities, they all require chips that are manufactured at TSMC against the background of being the world’s largest supplier of chips,” said Mehdi Hosseini, a technology analyst at Susquehanna. “If, God forbid, Taiwan Semiconductor can’t supply chips due to an invasion by China, I think the global economy will slow down more and hurt more than the corona did to the economy, he said.
In China, chip manufacturing is still lagging behind, even though China has increased its chip factory building efforts in recent years, with supportive policies and yet, it took SMIC, the Chinese chip company 15 years to reach where Taiwan Semi was 10 years ago, Hosseini said.
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