Will Taiwan respond to TSMC’s call to ramp up chipmaking efforts?

The news: Taiwan Semiconductor Manufacturing Corporation (TSMC), the world's largest contract chipmaker, is calling on Taiwan to produce more equipment essential to advanced chipmaking, per Bloomberg.

Why it’s worth watching: TSMC chairman Mark Liu said Taiwan needs to build a fuller domestic semiconductor ecosystem in anticipation of growing US sanctions that will curtail the flow of vital technology to China and Taiwan.

• The company made a 1.86 trillion New Taiwan dollars ($60.4 billion) investment for new 3-nanometer and 5nm chip production in its factory in Taiwan.
• TSMC expects to pour between $32 billion and $36 billion into capital expenditures in 2023 and continues to diversify its operations. It’s looking at adding a second chip factory in Japan and its first plant in Europe.
• Liu said that Taiwan investments will create some 10,000 high-tech jobs and 23,500 construction positions, and that semiconductors will only become more critical in the tech supply chain over the next 10 years.

Key takeaways: While TSMC is diversifying production by establishing overseas factories in industry hubs like Japan and the US, it will focus the development and production of high-end chips in Taiwan to avoid US chip and technology embargoes.

• In return, TSMC wants to see Taiwan better support the chipmaking push by offering more tax incentives for foreign equipment makers to set up shop.
• US firms Applied Materials, KLA, and Lam Research are among the leading suppliers of chipmaking gear that may be affected by any move to localize production of their products within Taiwan.

Our take: Despite its expansion efforts and investments outside of Taiwan, TSMC is drumming up support for future efforts in advanced chipmaking while also ensuring the country maintains its lead in semiconductors.

• Taiwan’s failure to respond in a timely manner could result in competing countries catching up. In context, China is similarly drumming up investments despite new restrictions on chipmaking exports.
• This would leave TSMC exposed and reliant on US chipmaking gear and unable to own the complete ecosystem.

This article originally appeared in Insider Intelligence's Connectivity & Tech Briefing—a daily recap of top stories reshaping the technology industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.

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