Apple supplier TSMC believes that US efforts to rebuild chip manufacturing at home are doomed to fail, as it finds itself caught between China and the United States in a tech cold war.
TSMC
Morris Chang founded TSMC in 1987 when Taiwan recruited him from the US to help build an electronics industry. The contract manufacturer rose to become the top chipmaker in the world, commanding 20% of global wafer fabrication and 92% of advanced chip capacity.
US share in global chip manufacturing shrunk from 37% in 1990 to 12% in 2020, but the country wants to regain its dominance. In particular, US Department of Defense is worried that the country's dependence on Taiwan could put chip supplies for the defense industry at risk.
In response, President Biden signed the CHIPS Act into law on August 9, 2022. It provides over $52 billion to help US companies build new semiconductor facilities, fund research, and expand existing manufacturing.
Taiwan isn't happy about the move because it sees its semiconductor dominance as a "silicon shield." The government believes that if China were to attack the country, the US would come to its aid to prevent China from seizing the industry.
Market share for countries in semiconductor manufacturing
When US House Speaker Nancy Pelosi visited Taiwan in August, she met with Morris Chang and Mark Liu, chair of TSMC. Chang told Pelosi that Washington's efforts to rebuild its chip manufacturing were doomed to fail, according to Taiwan's Financial Times.
But the United States may not have much choice. Analysts at investment bank Credit Suisse have estimated that if the world loses access to Taiwan's chip plants, it will disrupt the production for everything from computers to cars.
Apple would be impacted too, as it relies heavily on TSMC for chip production. While it has expanded some of its manufacturing to other countries such as Vietnam and India, those moves do not diversify Apple's chip supply at all.
Still, TSMC remains a major supplier for Apple and other companies, and its future between the US and China is uncertain.
"The monopoly in semiconductor production creates instability," said Brad Martin, director of the National Security Supply Chain Institute at the Rand Corporation. "If the US is faced with a need to make a decision between protecting its economy and defending Taiwan, that starts to become a very stark decision."
TSMC has made some efforts to help the US by planning a semiconductor facility in Arizona, the first such chip facility it will develop outside of its home country. TSMC expects it will reach its production start in early 2024.