Taiwan’s New Tech Czar Confident TSMC Can Guard Chip Secrets Amid Expansion

Key Takeaway

• Taiwan's new tech minister assures TSMC will prioritize advanced manufacturing in Taiwan while expanding to the US, Japan, and Europe.
• TSMC and ASML have mechanisms to disable chipmaking machines if China invades Taiwan, safeguarding critical technology.
• International collaborations with countries like the US, Germany, France, and Canada focus on AI, quantum computing, and chips.

TSMC's Overseas Expansion

Taiwan’s new science and technology minister, Wu Cheng-wen, expressed confidence in Taiwan Semiconductor Manufacturing Co. (TSMC) safeguarding its proprietary advanced technology as it expands overseas. TSMC, which produces the majority of the world’s most advanced chips, is setting up factories in the US, Japan, and Europe. Wu emphasized that TSMC will continue to build its most advanced manufacturing technology in Taiwan first. "When TSMC promises advanced manufacturing technology overseas, it is still building that first in Taiwan," Wu stated at his first press conference at the National Science and Technology Council. The minister expects TSMC to retain its key research and development functions in Taiwan while complying with regulations during its international expansion.

Wu's agency, the National Science and Technology Council (NSTC), supports TSMC and the broader chip ecosystem in Taiwan. The pandemic highlighted the importance of reliable semiconductor supplies, prompting governments worldwide to secure chipmaking within their borders. Countries are courting Taiwan to ensure their supply or attract investments, with Wu’s council playing a central role in this tech diplomacy. Nvidia Corp. CEO Jensen Huang remarked, "Taiwan is at the epicenter of the world’s technology supply chain. The technology industry depends very heavily on Taiwan and continues to for some time."

International Collaborations

The NSTC has agreements for science and technology cooperation with the US, Germany, France, and Canada. France, in particular, has been public about its collaboration with Taiwan. Franck Paris, the top French diplomat in Taiwan, noted the continuity of this policy based on newly inaugurated President Lai Ching-te’s speech. Since signing an agreement in November to work together on areas including AI, quantum computing, and chips, the two countries have announced specific areas of focus. Paris highlighted, "From the political drive, I think the key efforts will be on financing innovation. I think we can be better on that. And this is where we are going to focus our exchanges with the incoming administration."

Wu also expects Taiwan to use its technology to advance social and cultural priorities at home. With energy being a key concern, the NSTC will support the development of more efficient power chips to build a more sustainable industry. In his speech, President Lai emphasized, "Taiwan, a ‘silicon island’, must do all we can to expedite our transformation into an ‘AI island’."

Contingency Plans for Invasion

ASML Holding NV and TSMC have developed mechanisms to disable their advanced chipmaking machines if China invades Taiwan. This measure aims to safeguard critical technology amid escalating geopolitical tensions. The US government has expressed concerns to Dutch and Taiwanese officials about the potential consequences of Chinese aggression towards Taiwan. ASML has assured the Dutch government of its ability to remotely disable its extreme ultraviolet (EUV) machines, which are crucial for producing the smallest microchip transistors. These machines, costing over €200 million ($217 million) each, require regular servicing and updates, allowing ASML to implement a remote shut-off if necessary.

The Netherlands has conducted simulations to assess the risks of a potential invasion, and the US has influenced Dutch export controls to prevent ASML's technology from reaching China. Despite these measures, China has made significant strides in chipmaking, with Huawei Technologies Co. producing a smartphone rivaling Apple's iPhone using older ASML printers and tools from US suppliers. TSMC Chairman Mark Liu hinted that any invader of Taiwan would find the company’s chipmaking machines out of order, stating, "Nobody can control TSMC by force. If there is a military invasion you will render TSMC factory non-operable."

Street Views

• Jensen Huang, Nvidia Corp. (Bullish on Taiwan's technology industry):

  "Taiwan is at the epicenter of the world’s technology supply chain. The technology industry depends very heavily on Taiwan and continues to for some time."

Management Quotes

• Wu Cheng-wen, Minister of Science and Technology:

  "When TSMC promises advanced manufacturing technology overseas, it is still building that first in Taiwan."
  "Taiwan, a ‘silicon island’, must do all we can to expedite our transformation into an ‘AI island’."