Taiwan Should 'Keep a Tight Hold,' Defend Its Chip Industry: Morris Chang

Taiwan Semiconductor Manufacturing Co. (TSMC) founder Morris Chang on Wednesday called on the democratic island of Taiwan to defend its semiconductor industry, amid saber-rattling from China and an unprecedented drought.

"Semiconductor manufacturing is a crucial industry that touches on people's daily lives, the economy and national defense," the 89-year-old Chang told an Economic Daily forum in Taipei.

"It is also the first industry for which Taiwan has earned a competitive position on the global stage."

"It's very difficult to create such a flagship chip industry over years, and it's also very challenging to keep this edge," he said. "I call on the government, society and TSMC to keep hold of it tightly."

His warning came two days after TSMC's CEO, C.C. Wei, told investors that the company thought the current global semiconductor chip shortage could last into 2022.

Wei told JP Morgan analyst Gokul Hariharan: "We see the demand continue to be high. And the shortage will continue throughout this year and may be extended into 2022 also."

His comments came as Intel's new CEO Pat Gelsinger told the Washington Post that the shortage could last "a couple of years."

Both companies are plowing billions into new capacity over the next few years.

Growing military tensions

Earlier this month, U.S. President Joe Biden met with semiconductor industry executives in Washington to discuss solutions to the chip crisis, the latest move in a broader effort to bolster the domestic chip industry.

The meetings took place against a backdrop of intensifying military incursions by China's military into Taiwan's air defense identification zone (ADIZ) in recent weeks, prompting fears that chip supply could face a further threat.

Ars Technica founder Jon Stokes wrote on his blog on April 14 that increased military tensions in the region could prompt a "phased migration" away from reliance on TSMC, something that could take years to implement, however.

"I should note that already something like the beginnings of a phased migration away from TSMC is probably already in the works, in light of all the military activity around Taiwan at the moment," Stokes wrote.

"Every entity with a dependence on TSMC is right now in meetings trying to figure how to decrease that dependence so that if anything happens to TSMC they’re able to survive it."

Drought, supply disruptions

At home, TSMC is faced with its own problems, including the worst drought in decades affecting water supply, and power supply disruptions.

The linchpin of a global U.S.$450 billion industry that provides the computing power for anything from smartphones and cars to advanced military hardware, TSMC was founded in what used to be one of the wettest places in the world.

But Taiwan hasn't been hit by a tropical storm in a year, and many of its rivers and reservoirs have been shrinking ever since, with the Tsengwen reservoir at less than 12 percent capacity.

Earlier in April, the government imposed water rationing for more than one million households and businesses in central Taiwan, with taps cut off for two days in every week, Agence France-Presse reported.

TSMC alone used 156,000 metric tons of water a day across Taiwan's three science industrial parks in 2019 - the equivalent of 60 Olympic-size swimming pools, the agency said.

The company said in a statement: "TSMC has always maintained contingency plans for each stage of water restrictions... So far there's no impact on production."

U.S. chip giant Intel recently announced plans to invest U.S.$20 billion in two new plants in Arizona as part of a plan to meet growing global demand.

"Having 80 percent of all supply in Asia simply isn't a palatable manner for the world to have its view of the most critical technology," Intel chief executive Pat Gelsinger told the BBC.

"And the world needs a more balanced supply chain to accomplish that."

Reported by Hwang Chun-mei for RFA's Mandarin Service. Translated and edited by Luisetta Mudie.