Semiconductor giant TSMC was feted this week by US President Joe Biden and Apple CEO Tim Cook at a ceremony to unveil its $40 billion manufacturing site in Arizona ̵[ads1]1; a huge investment designed to secure America’s supply of the most advanced chips.
But at home in Taiwan, there is deep unease over the increasing political and commercial pressure being placed on the world’s most important chip manufacturer to expand internationally. The company is building a plant in Japan and is considering investing in Europe.
“They’re like the Hope Diamond of semiconductors. Everyone wants them,” says G. Dan Hutcheson, vice president of TechInsights, a research organization specializing in chips. (The Hope Diamond is the world’s largest blue diamond, now housed at the Smithsonian Institute’s National Museum of Natural History in Washington.)
“Customers in China want them to build there. Customers in the US want them there. And customers in Europe want them there, too,” he added.
Apart from the risk that TSMC will take its most advanced technology with it – depriving Taiwan of one of its unique assets and reducing local employment opportunities – there are fears that a reduced presence for the company could expose Taipei to greater pressure from Beijing, which has vowed to take control of the self-governing island, by force if necessary.
TSMC is considered a national treasure in Taiwan and supplies tech giants including Apple ( AAPL ) and Qualcomm ( QCOM ). It mass-produces the most advanced semiconductors in the world, components that are essential to the smooth operation of everything from smartphones to washing machines.
The company is perceived as so valuable to the global economy, as well as to China – which claims Taiwan as its own territory despite never having controlled it – that it is sometimes even referred to as part of a ” silicon shield” against a potential military invasion from Beijing. TSMC’s presence provides a strong incentive for the West to defend Taiwan against any attempt by China to take it by force.
“The idea is that if Taiwan became a semiconductor powerhouse, then America would have to support and defend it,” Hutcheson said. “The strategy has been super successful.”
A day before Tuesday’s Phoenix ceremony, Chiu Chenyuan, a lawmaker in the opposition Taiwan People’s Party, grilled Foreign Minister Joseph Wu about whether there is a “secret deal” with the United States to disadvantage Taiwan’s chip industry.
Chiu claimed that the chip giant was under political pressure to move its operations and most advanced technology to the United States. He cited the transfer of 300 people, including TSMC engineers, to the Arizona plant. In response, Wu said there was no collusion, nor was there any attempt to diminish Taiwan’s importance to TSMC.
Patrick Chen, the Taipei-based head of research at CL Securities Taiwan, said there was a shared concern on the island about TSMC’s growing international importance, the pressure it faces to expand and what it means for Taiwan.
“It’s similar to what happened in the US in the ’70s and ’80s when manufacturing jobs were moved away from the US to other countries. Many local jobs were lost and cities went bankrupt,” he said.
CNN has asked TSMC for comment on the expansion plans.
CEO CC Wei had previously said, “Every region is important to TSMC,” adding that it would “continue to serve all customers worldwide.”
Founded in 1987 by Morris Chang, TSMC is not a household name outside of Taiwan, although it produces an estimated 90% of the world’s super-advanced computer chips.
Semiconductors are an indispensable part of almost all electronic devices. They are difficult to make due to the high development costs and level of expertise required, meaning much of the production is concentrated among a handful of suppliers.
Worried about losing access to key chips, especially as tensions have escalated between China and the United States, as well as between Beijing and Taipei, governments and large consumer-facing companies such as Apple have asked semiconductor companies to localize their operations, according to experts.
“TSMC’s decision to expand its Arizona investment is evidence that politics and geopolitical risk will play a bigger role than ever in supply chain decisions,” said Chris Miller, author of “Chip War: the Fight for the World’s Most Critical Technology.”
“It also suggests that TSMC’s customers are asking for more geographic diversification, which was not previously a primary concern for large customers.”
On Tuesday, TSMC said it increased its investment in the United States by building a second semiconductor factory in Arizona, increasing its total investment there from $12 billion to $40 billion.
Chang had previously said the Arizona factory would produce 3-nanometer chips, the company’s most advanced technology, as advances in chip manufacturing require etching ever-smaller transistors onto silicon wafers.
These announcements alarm politicians such as Chiu of the Taiwan People’s Party. He worries that the island will lose out when TSMC is cured globally.
Chen of CL Securities said national security concerns among governments globally are driving TSMC’s expansion. But he believes the company will continue to produce its most advanced technology at home.
“This will make economic sense given [the] lower wages [and] higher quality Taiwanese engineers,” he said, adding that the company needs approval from Taiwan’s Ministry of Economy to move its most advanced technologies overseas, which it was unlikely to grant.
Many experts believe that by the time 3-nanometer chips are made in Arizona, TSMC’s Taiwan operations will be producing even smaller, more advanced chips.
Hutcheson also believes that TSMC will keep its most cutting-edge development teams in Taiwan.
“When you have a team of people doing development work, they work very closely together. You don’t want to disturb it. It’s not an easy thing to do, he said.
— CNN’s Wayne Chang contributed to this report.