Faced with China’s aggression, TSMC may have difficulty moving its factories from Taiwan

Tensions around the Taiwan Strait have never been so palpable. The situation of companies crucial to the global economy like TSMC raises questions.

For anyone who follows at least the international geopolitical situation and even more so that surrounding Taiwan, it is clear that Chinese pressure on the “dissident” island is increasing.

In this context of uncertainty, large companies like TSMC are seeking to diversify their activity, but “extracting” factories from Taiwan is proving particularly delicate, if not impossible.

Tensions on the Taiwan Strait

Appointed CEO of TSMC only a few days ago, CC Wei must face issues that can easily be described as “hot” while his predecessor, Mark Liu, who has retired, had highlighted his desire to see the Taiwanese firm establish itself in various regions of the world.

You should actually know that TSMC, by its full name Taiwan Semiconductor Manufacturing Company, is the main producer of semiconductors in the world. It controls more than 50% of the market, but unlike a company like Intel, it has an extreme concentration with 80 to 90% of its production on the island of Taiwan.

Recall that in 1949, the government of the Republic controlled by the Kuomintang was established on the island following the victory of the communists during the civil war which raged on the continent. Since then, two states have remained: the People’s Republic of China on the mainland and the Republic of China on the island of Taiwan.

TSMC produces 80-90% in Taiwan

For the government in Beijing, there has never been any question of recognizing the existence of the Republic of China. Taiwan is considered a province that must return to its fold “ if necessary by force “. President Xi Jinping is also becoming more and more virulent.

Tensions regularly flare up in the Taiwan Strait, which separates the two countries by a maximum of 130 kilometers, and there is clearly no time for appeasement. While TSMC is a company on which the global industry, so to speak, rests, these tensions put pressure on the company’s management, and we understand Mark Liu’s desire for “openness”.

A desire, however, tempered by his successor. During the annual general meeting of the company, CC Wei first reminded: “ Instability across the Taiwan Strait is indeed a factor to consider for the supply chain, but I want to say that we certainly do not want wars to arise. »

Relayed by our colleagues from TechReportCC Wei’s remarks then clearly highlighted the fact that moving TSMC’s production outside of Taiwan is ” almost impossible “.

Impossible emigration

Why do Mark Liu’s speeches just a few months ago and CC Wei’s speeches today seem so far apart? To understand this, we need to take the problem of semiconductor production more broadly.

Let’s remember that Joe Biden and the American administration have continually courted TSMC in order to see the company establish itself in the United States. Factories have also been set up in Arizona, creating 6,000 specialized jobs, 20,000 jobs in construction and several tens of thousands of jobs with subcontractors. However, even if we do not have precise figures, Arizona only represents a fraction of TSMC’s production.

The Taiwanese company is faced with multiple challenges here. First, as large as it is, the United States simply does not have the specialized workforce to open enough factories, and Europe seems no better off. Furthermore, here we do not even take into account the corporate culture, which is very different between these regions of the world with almost opposite work habits and relationships.

Furthermore, as Lisa Su, CEO of AMD, explained, semiconductor production is difficult to separate: “ We do a lot of our manufacturing here with key suppliers like TSMC…And then we also have a number of partners who are helping us build the ecosystem here in Taiwan. » Ecosystem, a word that sums up the difficulties of rebuilding a solid industrial fabric with regard to semiconductors in the United States, and even more so in Europe.

Sources: Reuters, TechReport