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The tension between China and Taiwan, the world’s largest manufacturer of electronic chips, threatens the global economy.
The size of a fingernail, comprising up to 8 billion transistors, semiconductors, also known as integrated circuits, are extremely important to the global economy. “The media have focused on the possibility of a direct confrontation between the United States and China over the status of Taiwan,” explains Stéphane Monier, director of investments at the Lombard Odier bank. But beyond the political and military issues, the economic consequences of a conflict would be disastrous. Semiconductors are essential to the electronics sector. Without them, everything from airbags and parking cameras to computers and cell phones would be useless. Microchips are as fundamental to weapon systems as they are to refrigerators and dishwashers. »
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Taiwan remains by far the largest semiconductor manufacturer. The complexity of manufacturing ever more powerful chips at ever smaller scales requires hyper-sophisticated techniques. Moore’s Law, named after Gordon E. Moore, one of the founders of Intel, refers to an observation he made in 1965 that the number of transistors on an electronic chip doubles every two years, while its cost simultaneously decreases by half. It remains true. In total, Taiwanese companies, dominated by TSMC, produce, including subcontracting, more than 60% of the world’s microprocessors.
More worryingly, they supply 92% of the market for the most sophisticated logic chips, according to estimates by Boston Consulting Group. The 8% market share is held by Samsung in South Korea. Demand is expected to have increased by 10% in 2022 to more than 600 billion euros worldwide, according to audit firm Deloitte. “The importance of semiconductors has been illustrated by a shortage during the pandemic which has blocked production – and economic recovery – among car manufacturers”, recalls Stéphane Monier
The world’s major economies are all investing in their chip production capabilities. The United States voted on July 27 a support plan of 280 billion dollars for their microprocessor industry. In June, the European Commission paved the way, with the European Chips Act, for the creation of a microprocessor industry in Europe. The key is an investment of 40 billion in ten years to double the weight of the Old Continent in the world production of chips by bringing it to 20% in 2030. For the time being, cars, computers and household appliances continue to run on ” made in Taiwan”.