Chips and COVID Burnish Taiwan’s Reputation

Taiwan has often found itself underestimated or overlooked by the rest of the world – sometimes mistaken for Thailand or considered largely through the prism of China’s view of the island.

Lately, however, Taiwan has been coming in for unaccustomed international attention. Over the past 14 months, its government’s early action and skillful handling of the COVID-19 pandemic has gained Taiwan global recognition. When commentators in the West cite an example of a country that has met the challenge well, they invariably note Taiwan’s remarkable performance in holding the spread of the coronavirus to under a thousand cases, with only nine deaths.

Even more recently, Taiwan’s proficiency as a high-tech supply center, especially for semiconductor production, has been receiving worldwide notice. The reason for the new awareness was an abrupt shortage of chips for use in the automotive industry, causing assembly lines in the U.S., Germany, and Japan to temporarily shut down or reduce output. Unfortunately, news reports such as Bloomberg’s “The World is Dangerously Dependent on Taiwan for Semiconductors” conveyed the notion that the crux of the problem was the dominant position in the industry held by Taiwanese companies, notably Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest chip foundry. 

The Bloomberg article cautioned that given China’s continuing threats toward Taiwan, the island’s chipmakers’ prowess represents a potential “choke point in the global supply chain” for semiconductors. Adding fuel to the argument, U.S. Senator Debbie Stabenow from the car-producing state of Michigan appeared to blame the situation on a “decision” by TSMC to “reduce its shipments” to American manufacturers.

As various industry observers hastened to point out, the critics basically misunderstood the nature of the current shortage. Rather than being caused by any chipmaker’s decision on supply allocations, the problem was mainly due to the auto companies’ own failed forecasts. At the onset of the pandemic, they began cutting chip orders based on their pessimistic outlook for the car market. The sudden upsurge in global car sales late last year – at the same time as lockdown policies increased demand for chips for devices for work or entertainment at home – brought component shortfalls that overwhelmed automobile assembly lines.

From a broader perspective, Taiwan over the years has proven itself to be a reliable and responsible trading partner. The U.S. government – under President Trump and now with the Biden administration – has recognized that fact by including Taiwan in ongoing discussions on how to ensure stronger and more secure global supply chains for strategically sensitive products. TSMC’s commitment to build a huge US$12 billion wafer fab in Arizona, where it will be joined by various Taiwanese suppliers to form a production cluster, is further evidence of Taiwan’s intention to forge even stronger business ties with the U.S.

The world’s reliance on Taiwan for semiconductors should be viewed not as a vulnerability but as an opportunity to maintain a robust relationship with a trusted trade partner. While Taiwan remains under existential pressure from China, the island is taking steps to enhance its cybersecurity to counter the risks. And with continued U.S. military support through defense equipment and training assistance, Taiwan should have the ability to deter serious provocation from Beijing.

Under those conditions, AmCham Taiwan sees no reason why the world should not continue to benefit from the innovative semiconductor design and production that Taiwan has become known for.

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