Taiwan and US tensions with China pose 'serious' challenges for chip industry: TSMC

HSINCHU, Taiwan – Rising Taiwan-China and US-China tensions have brought more serious challenges for the semiconductor industry, the chairman of Taiwanese chipmaker TSMC said on Wednesday.

Taiwan is a major producer of chips used in everything from cars and smartphones to data centres and fighter jets, and Taiwan Semiconductor Manufacturing Co Ltd (TSMC) is the worlds largest contract chip-maker and Asias most valuable listed firm.

While the chips sector is already bracing for waning demand as red-hot inflation squeezes spending, Taiwan faces a tougher situation – sandwiched between its largest export market China and its main international backer and arms supplier, the United States – especially as Beijing steps up military pressure to force Taipei to accept Chinese sovereignty claims.

Speaking at the Taiwan Semiconductor Industry Associations annual convention, TSMC Chairman Mark Liu said: The US-China trade conflict and the escalation of cross-Strait tensions have brought more serious challenges to all industries, including the semiconductor industry.

In recent years, Chinas government has never stopped promoting its domestic semiconductor industry, including chip design, manufacturing, and packaging, he said.

The United States has also passed its CHIPS Act to vigorously support local research and development and manufacturing, Mr Liu said.

Mr Liu said he looked forward to Taiwans industry, government and academia developing more concrete, constructive measures on industrial policies related to innovation, research, talent education and retention to maintain Taiwans most critical semiconductor industry advantages.

He noted that this year the industry value of Taiwans chip sector is expected to have risen one-fifth compared with 2021, even with the impact of Sino-US trade friction and geopolitical problems.

While Mr Liu did not make direct mention of it, the sweeping set of export controls announced by the United States this month, aimed at slowing Chinas progress in advanced chip manufacturing, is expected to also impact Taiwanese chip-makers.

The new rules require US companies to cease supplying Chinese chip-makers with equipment to make relatively advanced chips, though Washington has granted some non-Chinese companies operating in China one-year licences.

The difficulty this time will be a very big challenge, Mr Nicky Lu, chairman of Taiwan chip design firm Etron Technology Inc, told reporters ahead of the event. No one will escape the impact.

Mr Frank Huang, chairman of Powerchip Semiconductor Manufacturing Corp, said the sector was caught in a difficult situation.

We do business on both sides of the Strait. So we cant listen to the US and not do any business with mainland China. Then what would everyone eat? Mr Huang said. Our industrys position is to maintain our competitiveness.

TSMC, which makes most of its chips in Taiwan, last week cut its annual investment budget by at least 10 per cent for 2022 and struck a more cautious note than usual on upcoming demand.

TSMCs dominance in making some of the worlds most advanced chips for high-end customers such as Apple Inc and Qualcomm Inc has shielded it in recent quarters from the downturn flagged by chip-makers including Micron Technology Inc. REUTERS More On This Topic Chip giant TSMC cuts capital spending 10% in warning for tech sector The fallout from US chip curbs on China