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Taiwan boosts advanced chip plans, warns of high-tech fallout if China invades

Taiwan Semiconductor Manufacturing Co. (TSMC) said on Friday it would join the race to make next-generation 2-nanometer chips by 2025, amid growing saber-rattling from China.

The company said it would start volume production of the low-energy advanced chips within the next three years. Samsung and Intel have made similar announcements in recent months.

“We are living in a rapidly changing, supercharged, digital world where demand for computational power and energy efficiency is growing faster than ever before, creating unprecedented opportunities and challenges for the semiconductor industry,” TSMC CEO C.C. Wei told the North America Technology Symposium.

TSMC launched the 5nm process in 2020 and is scheduled to start commercial production of the 3nm process later this year in Tainan. The first 2-nm plant will be built in Hsinchu, with production to expand later to Taichung, the island’s Central News Agency reported on Friday.

The announcement came after Taiwan’s chief trade negotiator John Deng warned that a potential Chinese invasion — increasingly threatened by the ruling Chinese Communist Party (CCP) — would lead to a global shortage of semiconductor chips.

“The disruption to international supply chains; disruption on the international economic order; and the chance to grow would be much, much (more) significant than [the current shortage],” Deng told Reuters at a World Trade Organization (WTO) meeting in Geneva this week.

“There would be a worldwide shortage of supply.”

‘Special operation’ fears

Taiwan dominates the global market for the most advanced chips, with exports totaling U.S.$118 billion last year, Reuters reported, quoting Deng as saying he hopes to decrease the 40 percent share of the island’s exports that are currently being sold to China.

While Taiwan has never been governed by the CCP, nor formed part of the People’s Republic of China, and its 23 million people have no wish to give up their sovereignty or democratic way of life, Beijing insists the island is part of its territory.

Taiwan has raised its alert level since Russia invaded Ukraine, amid concerns that CCP leader Xi Jinping could use an invasion of the democratic island to boost flagging political support that has been dented by growing confrontation with the United States and draconian zero-COVID restrictions at home.

Xi recently signed a directive allowing “non-war” uses of the military, prompting concerns that Beijing may be gearing up to invade the democratic island of Taiwan under the guise of a “special operation” not classified as war.

“One interpretation is that, in doing this, Xi Jinping is copying Putin’s designation of the Ukraine war as a ‘special military operation’,” U.S.-based current affairs commentator Xia Yeliang told RFA.

“Xi Jinping … wants to surpass Mao Zedong, and in doing that, he doesn’t think anyone is as good as him, not even Deng Xiaoping,” Xia said. 

Collective leadership

He said Xi is under huge political pressure from within party ranks, citing media reports and credible rumors from high-ranking sources within the CCP.”How’s he going to do that? Economically, the situation is already better than under Mao. So he means to liberate Taiwan, and fulfill Mao’s wish, the task that he was unable to complete himself.”

“A lot of people don’t trust Xi and worry that he’s going to get China into trouble … they could replace him with a system of collective leadership. So what does Xi do in response? He tries to create an atmosphere of fear, threatening to go to war, that if the U.S. does this or that, we’ll make our move,” Xia said.

“Xi Jinping wants to manufacture an external crisis; a sense that if we don’t invade Taiwan now, then the opportunity will be lost, so we have to move now. He wants everyone to support him as chairman of the Central Military Commission [ahead of] the CCP 20th National Congress,” he said.

Tseng Chih-Chao, deputy secretary-general of Taiwan’s Chung-hwa Institution for Economic Research, said global shortages of a particular kind of chip have already put a spanner in the works of automakers around the world, and that TSMC currently holds a 90-percent global market share in advanced chips.

“When we look at their main customers like Apple’s Nvidia chips, they are the most advanced chip manufacturers in the world,” Tseng said. 

“Without TSMC, the entire high-tech industry around the world would cease to function, including all of the chips that go into iPhones or Apple computers,” he said.

“Most importantly, there are no alternative suppliers who can make these chips anywhere in the world right now.”

“If China launched an attack, it could cause serious damage in a very short period of time, that would be very difficult to rebuild, especially after the [likely] loss of technology, equipment and talent,” Tseng said.

“So of course [Deng] was going to say this to the United States and other Western countries.”

Taiwan’s foreign ministry spokeswoman Joanne Ou said the island welcomed U.S. support, but stood ready to defend itself.

“In the face continued military expansion and provocation from China, Taiwan has a high degree of determination and capability to defend itself,” Ou said on June 16.

“[Our] government will continue to strengthen self-defense capabilities and asymmetric combat capabilities, maintain national security with solid national defense, and deepen Taiwan-US ties.”

Translated and edited by Luisetta Mudie.