China and Taiwan – Does China threaten the world’s biggest source of semiconductors?

08-05-2021 | By Robin Mitchell

Recently, talks around China and Taiwan suggest that China may be considering military action against Taiwan, and companies such as TSMC could be a priority for China. So why are western nations rallying to manufacture their own semiconductors, is China a threat to Taiwan, and why should engineers track global political changes?

Why are nations pushing to create their own semiconductors?

The COVID-19 pandemic has shaken the world right to its core with international travel being severely restricted, global economies tanking, and large scale unemployment. While the sales of vehicles ground to a halt, sales of electronics went up as many started to work remotely. But, the semiconductor industry, noticing that automotive parts were no longer in demand, decided to switch production in favour of commercial electronics. When the automotive industry restarted, the world’s supply of automotive ICs dropped dramatically, and the end result was a major semiconductor shortage.

Some semiconductor manufacturers have responded to this drop by switching production over to automotive components to try and help ease demand. Still, these devices can take up to 6 months to produce. Therefore, the automotive market will be hindered for at least 6 months (but a year is more likely). 

The COVID-19 pandemic has demonstrated to the world how sensitive, and important, the semiconductor industry really is. To make matters worse, the shortage of components has also demonstrated how most countries rely on far-east foundries for microchips, which has made governments and industry leaders alike concerned.

A nation that manufactures its own semiconductors is not only independent of outside forces with regards to demand and supply, but also provides a layer of security. Sourcing outside nations to create security-critical components can lead to security flaws including integrated backdoors and leaked chip design.

Is China a threat to Taiwan, and why does it matter?

If it's one thing that we engineers should avoid at all costs is politics; at the end of the day, what matters most to us is what components we want to use, how we want to use them, and the best sources of components. Unfortunately, however, separating politics from electronics is increasingly becoming difficult, and it is more than likely that the average engineer has already been affected by the political landscape.

While everyone knows about China and its importance in the manufacturing industry, not many understand Taiwan's major role. Taiwan is home to some of the world’s largest semiconductor manufacturers, including TSMC. These companies are not generic chip production plants; these plants are at the forefront of chip technology. Of course, researchers in the UK and the US can produce a 1 atom transistor in a lab, but companies like TSMC can make any commercial chip out there whether it’s the latest Intel processor or a high-end FPGA.

So, Taiwan is a major player in the semiconductor industry, but what does this have to do with China? Depending on which country you are from, Taiwan is either an independent nation or a Chinese province that refuses to co-operate with the Chinese government. While the two have mostly kept to themselves, there are reports that the Chinese military has been flying military aircraft into Taiwanese airspace. These actions, combined with statements by China on its view of Taiwan, leaves some experts worried that China might attempt a military takeover of the Island. 

China has been manufacturing semiconductors and electronic components for decades, but its technology has never come close to what companies like TSMC and Intel can produce. As a result, there is a concern that if China was to invade Taiwan, it would seize control of companies such as TSMC, and instruct these companies to produce devices for China, its military, and cybersecurity forces. 

Furthermore, seizing such companies would put many companies such as ARM and AMD at major risk as TSMC manufacture devices on-behalf of fabless chip designers. Therefore, an attack on Taiwan would have a disastrous effect on the world economy and electronics markets.

Why should engineers keep track of global politics?

While many find politics a sticky topic that can get people instantly hated, it is becoming more important for engineers to track and understand. For example, Donald Trump's presidency and his trade wars against China caused the prices of many components to fluctuate. In addition, the actions of governments around the world to handle COVID-19 had a major impact on component manufacturing.

Since electronic designs are dependent on component availability and prices, politics becomes an integral part of all circuits. As such, engineers may want to track politics to make long-term decisions so that their products can be manufactured reliably and remain relatively immune to major political changes. 

For example, engineers could look at the Taiwanese situation and consider changing their designs to either utilise different semiconductor manufacturers or avoid Taiwanese products. But, of course, China may never engage with Taiwan, and the continual stale-mate (like a hung parliament), could provide major long-term stability. 

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By Robin Mitchell

Robin Mitchell is an electronic engineer who has been involved in electronics since the age of 13. After completing a BEng at the University of Warwick, Robin moved into the field of online content creation, developing articles, news pieces, and projects aimed at professionals and makers alike. Currently, Robin runs a small electronics business, MitchElectronics, which produces educational kits and resources.