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What is Taiwan’s overall semiconductor strategy?

What is Taiwan’s overall semiconductor strategy?
Yahoo!News
June 28, 2024
Author Thought Tank
 

⊙Gould
 
The Huang Jen-Hsun whirlwind made the general public realize that Taiwan’s semiconductor industry plays a pivotal role in the world. How did Taiwan achieve its position in the global semiconductor industry chain this year? In response to Taiwan's technological status that is "looked up to" by the world today, has the government prepared a set of strategies to enable this "silicon island" to continue to prosper? In fact, in the eyes of science and technology experts and policy experts, the Taiwan government's efforts are not enough.
 

Taiwan Semiconductor’s success relies 70% on historical luck
 
"Europeans ask me, how is Taiwan's semiconductor industry successful? I tell them 70% is because of luck!" Yang Guanglei, former director of TSMC's R&D department and adjunct professor at National Taiwan University, spoke at the National Science Council's "Science, Democracy and Society Research Center" ( DSET) said this in the opening remarks of the forum. What he calls "luck", to be more precise, is Taiwan's turnaround that has been brought about by several conditions unique to Taiwan over the past half century.
 

The first is the scientific and technological talent pool formed over decades. During the martial law period, most of Taiwan's top talents wanted to develop abroad, and studying science and engineering had fewer cultural barriers than humanities and social sciences, making it easier to survive abroad. After "Coming to NTU and going to the United States," many of these science and engineering students entered the then booming semiconductor industry in the United States and worked in the best companies. "These people all played in the major leagues in the United States." Looking back on his generation, Yang Guanglei said that since the 1970s, Taiwan has reserved semiconductor talents in the United States for 30 years and played in the major leagues for 30 years. These people gradually returned to Taiwan in the late 1980s and early 1990s. , join the emerging semiconductor-related industries and promote the development of Taiwan's ITC technology industry.
 

At that time, treatment in Taiwan was far inferior to that in the United States. Why were these "major league" players willing to return to Taiwan to play "Chinese Professional Baseball"? Because technology companies such as TSMC promoted the stock dividend system, and the stocks of technology companies were listed one after another in the early 1990s, the stock value increased. "The stock dividend system generated a wave of returnees, and the stock listing used the power of investors to help these talents come back." Yang Guanglei pointed out that talents in the semiconductor industry have been growing and influxing since the 1970s, and now Taiwan's talent pool still ranks first in the world.
 

The 1980s was what Yang Guanglei regarded as the "Geopolitics 1.0" of the semiconductor industry. In the early 1980s, Japan once accounted for more than 50% of the world's semiconductors. The United States could not bear to lose its dominance and decided to attack Japan. A series of policy sanctions not only caused Japan's semiconductor industry to plummet, but also created a gap in semiconductor talents. "Now go to Japan. The people I met were all from the generation I knew in the 1980s.”
 

The foundry that no one expected created a miracle for TSMC
 
When Japan's semiconductor industry was hit hard, Taiwan's semiconductor industry was just budding. Among them, TSMC chose wafer foundry, which no one was optimistic about at the time. Under Moore's Law, the industrial division of labor in the global semiconductor industry is very clear, which has also made Taiwan's semiconductor foundry industry very efficient. This misaligned development has transformed TSMC from a small company into a behemoth in the 21st century.
 

By 2018, Trump couldn't stand China's economic advancement, so he took action against China. The United States and China launched a comprehensive geopolitical competition, which also entered what Yang Guanglei called "Geopolitics 2.0." Not long after the war between China and the United States, the world encountered Covid-19. This century-old catastrophe has become what Yang Guanglei calls "God's second gift to Taiwan" because "the disruption of the global supply chain highlights the importance of Taiwan's semiconductor industry." "Let the world see how awesome Taiwan is." Taiwan has been praised by the world, but it has also forced Taiwan to stand on the wave of geopolitical risks and face the most severe test.
 

Economics and national security have become one
 
The biggest difference between Geopolitics 2.0 and the past is that economic issues and national security are integrated into one. DSET researcher Zhang Zhicheng pointed out that before 2018, economic and trade policy pursued maximizing benefits, and economic and trade policy and national defense and security policy were separated; after 2018, the two have been integrated. Economic security has become the core of various countries' economic and trade policies. Mi-Yong Kim, a former senior reviewer at the Bureau of Industry and Security of the U.S. Department of Commerce and currently teaching at the School of International Affairs at National Chengchi University, recalled that in the past, those who made trade policy and implemented export controls were two unrelated groups of people in the same building. You may not have recognized each other when you passed by; now the two have merged together. Export controls are no longer just for diplomatic and national security reasons, but to maintain a country's leading position in science, technology, engineering, research and development, and manufacturing. What is regulated is not just goods but technology, including tangible and intangible technology.
 

Under the consideration of "economic security", the United States imposed export controls on China, but at the same time, it also required TSMC to set up factories in the United States on the grounds of reducing risks. Nowadays, the United States not only has one or two fabs, but also hopes that some of the research and development will also pass.
 

Is the United States "demanding more than it wants"? How will Taiwan respond to the challenges of Geopolitics 2.0?
 

Shilun Tsao, Global Marketing Director of the International Semiconductor Industry Association (SEMI) and President of Taiwan, pointed out that industrial division of labor is inevitable, and maintaining a large production scale in Taiwan is not necessarily a good thing. However, Taiwan must maintain its subjectivity and active participation in the process of reorganizing the global supply chain, and let global allies know that Taiwan has made positive contributions to the global industrial chain.
 

How to actively participate? Xu Zunci, director of the Taiwan Southeast Asian Countries Research Center of the China Economic Research Institute, emphasized: "Taiwan must make a statement from its own perspective instead of endless contributions." She said that in the process of making friends with the world, Taiwan may lose its own talents and technology. The friends of friendshoring are constantly changing. "Will cooperation with today's friends create tomorrow's enemies? Will today's friends become friends of enemies?"
 
 
I can’t see the Taiwan government’s semiconductor policy
 
The above questions boil down to this: Has Taiwan formed an independent semiconductor policy? Will it only passively cooperate with the economic security needs of powerful countries such as the United States and Japan? For example, when TSMC went to the United States and Japan to set up factories, we only saw TSMC negotiating with the United States and Japan, but not the role of the Taiwanese government. Xu Zunci also said that TSMC's third-party manufacturers must follow TSMC to the United States to survive. The process is extremely difficult for small and medium-sized enterprises, but they have not seen the government provide them with assistance.
 

Will the government help manufacturers relocate overseas? At first glance, it sounds unreasonable. What is usually heard is that the government assists in attracting investment, just like China's central government's "two exemptions and three reductions" and the local government's "three transports and one leveling". Xu Zunci explained that the U.S. federal or state governments will provide TSMC with preferential treatment and subsidies, but they may not benefit TSMC’s third-party manufacturers. The Taiwan government should come forward to negotiate with the U.S. and ask the U.S. to give preferential treatment to these small and medium-sized manufacturers.
 

Yang Guanglei mentioned another important point: Although Taiwan's semiconductor talents are number one in the world, most of them are manufacturing talents but lack cutting-edge R&D talents, and cutting-edge research work requires longer-term accumulation. He talked about his experience visiting Europe. Europeans have high expectations for the manufacturing capabilities of Taiwan's semiconductor industry and hope to cooperate with Taiwan to implement their research results into mass production, so as to realize economic benefits. He hopes that government agencies, including the National Science Council, can build such a platform to make up for Taiwan's shortcomings in cutting-edge research. He sees hope for cooperation from Europe and Japan, and may even be able to strike a balance between cooperation and competition with South Korea. Indeed, South Korean semiconductor giant SK Hynix recently announced that it is cooperating with TSMC to produce next-generation HBM chips.
 

Jin Meiying even raised a sharp question to the Taiwan government: The whole world is imposing export controls, but Taiwan does not!
 

Taiwan does have a "Measures for the Administration of the Import and Export of Strategic High-tech Goods", but this is an export control based on the past concepts of national defense and national security, rather than a control to maintain economic competitiveness. Now, at the request of the United States, Taiwan has only passively cooperated with U.S. regulations for export review. Moreover, for the sake of their own commercial interests, manufacturers hope that the government will have as few export controls as possible.
 

Kim Mi-young pointed out that U.S. export controls are not just for hostile countries and competitors, but for all countries, with different restriction standards for different countries. Similarly, Taiwan also has many important scientific and technological resources. Not only does it have to export products to China, other countries may also obtain Taiwan's tangible and intangible scientific and technological resources to compete with Taiwan. Kim Young-young emphasized that the government’s export controls should focus on the national interests rather than the commercial interests of manufacturers.
 

In this era of Semiconductor Geopolitics 2.0, although Taiwan's international situation has weakened the Taiwan government's diplomatic capabilities, it is impossible to have "long-arm jurisdiction" like the United States, which can forcefully require countries and manufacturers to comply with its control regulations. Even so, the Taiwanese government must proactively construct its own overall semiconductor strategy, not just to share the glory of the sacred mountain that protects the country. Otherwise, Taiwan's semiconductor industry will not be able to cope with the ever-changing international competition.
 
 

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