Taiwan cautions Beijing over semiconductor exports

By Takahiro Suzuki and Fukutaro Yamashita / Yomiuri Shimbun Correspondents

1:00 JST, October 4, 2022

TAIPEI/BEIJING — Taiwan’s Economic Affairs Minister Wang Mei-hua has warned China against putting military pressure on Taiwan, the world’s largest producer of semiconductors.

In an interview with The Yomiuri Shimbun, Wang, who oversees Taiwan’s semiconductor policies, said supplies would be disrupted if a contingency were to occur in the Taiwan Strait, and China would suffer severe economic impacts.

Taiwan firms have a more-than 60% share of the semiconductor global market, in terms of contract manufacturing value. This figure rises as high as 90% in terms of advanced semiconductors compatible with the large capacity, ultra-high speed 5G wireless standard, among other areas.

Beijing relies on Taiwan for 36% of its semiconductor imports, and Wang emphasized that Taiwan thus contributes to China’s economic development.

Wang also expressed concern over the possibility of Taiwan-made semiconductors being used in Chinese weapons amid growing tension in the wake of stepped-up Chinese military exercises in waters surrounding Taiwan. The drills came in response to U.S. House Speaker Nancy Pelosi’s visit to Taiwan in August.

However, Wang said Taiwan has no intention of unilaterally restricting semiconductor exports, saying peace and stability in the strait were important for the stable supply of the material. She also said Taiwan’s semiconductor exports would be controlled under a system of international cooperation if Taiwanese-made semiconductors were used in a way to put Taiwan’s security under threat.

In light of the key role semiconductors play in economic security, moves to enhance checks on Beijing’s behavior are gaining momentum. To strengthen chip access and weaken Chinese involvement, the United States recently launched a working group dubbed “Chip 4” in cooperation with Japan, South Korea and Taiwan. Wang said Taiwan is participating in the alliance to make the semiconductor supply chain more resilient, adding that Taiwan is keen to sustain semiconductor development in tandem with other democratic countries.

The Japanese government invited major contract chipmaker Taiwan Semiconductor Manufacturing Co. to build a factory in Kumamoto Prefecture to boost domestic semiconductor production — manufacturing at the plant is expected to begin in 2024.

Acknowledging recent developments, Wang stressed that Taiwan’s semiconductor production and supply chain had developed over a period of 30 to 40 years, resulting in a high-quality system. She said it was not possible to create similar systems in other countries in the short term, although many nations were worried about their meagre output of semiconductors and hoped to lay down solid production and supply foundations.

Taiwan makes around 33% of the semiconductors used in Japan, many of which are used in automobile parts and mobile phones. Takahide Kiuchi, executive economist at Nomura Research Institute, Ltd., said Japan’s nominal gross domestic product would drop by 0.48%. if semiconductor imports from Taiwan were halted.