TSMC Founder Warns Semiconductor Plans Could Fail

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Plans by US, EU and others to bring semiconductor production into their own countries could result in a costly, unworkable system, says TSMC’s Cheng

Countries’ efforts to boost domestic semiconductor production could fail in spite of massive financial outlays, the founder of chip contracting giant Taiwan Semiconductor Manufacturing Co. (TSMC) has warned.

The remarks by Morris Chang, considered the godfather of Taiwan’s chip industry, at Asia-Pacific Economic Cooperation conference come as the US, China, Europe and Japan are all seeking to boost their own domestic chip production industries.

“If no one says anything about this, it could turn out to be terrible,” Chang said at a news conference during APEC, where he was Taiwan’s representative, Nikkei reported.

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“What may happen is that, after hundreds of billions and many years have been spent, the result will still be a not-quite-self-sufficient, and high-cost, supply chain,” Cheng told the conference, according to a transcript of his remarks.

The supply of chips for everything from consumer electronics to automobiles has been disrupted by unpredictable fluctuations during the Covid-19 pandemic, leading to automobile plant shutdowns around the world.

Meanwhile, Chinese companies such as Huawei have been restricted from acquiring advanced semiconductors by economic sanctions imposed by the US, amdist a trade war between the two countries.

Such factors have led a number of economies to boost domestic chip production plans over economic or national security concerns.

Free trade

Cheng told APEC that chips vital to national security should be made domestically, but for the civilian market “a supply chain substantially based on free trade system is by far the best approach”.

He said free trade has powered the advancement of semiconductors for decades, while the complexity of the technology has driven the supply chain offshore.

“It would be highly impractical to try to turn back the clock. If it is tried, cost will go up and technology advance may slow,” Cheng said.

The US Senate recently passed a bill worth $52 billion (£38bn) to support the domestic chip industry, while the EU is aiming to localize 20 percent of semiconductor production by 2030.

Japan and China have also made development of their semiconductor industries a top policy priority.

TSMC, which Chang founded in 1987, has plants in China, is investing in manufacturing chips in Arizona, and is considering plans for its first plant in Japan.

‘Infrastructure security’

Pat Gelsinger, chief executive of Intel, has said the company is planning advanced chip plants in multiple countries in the coming years, and is looking to boost the US share of global chip production from the current 12 percent to 30 percent in 10 years.

The US’ most recent supply chain review found a reliance on Taiwan’s chip production could be a point of vulnerability for semiconductor supply chains.

In an earnings call last week TSMC chairman Mark Liu said the company is expanding production into other countries in part because “the need for semiconductor infrastructure security has increased in recent years”.

TSMC is the world’s biggest contract chipmaker, with more than 50 percent of market share, and supplies Apple, Qualcomm, Nvidia, NXP and Sony, amongst others.

Cheng, 90, retired from the company in 2018.

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