Beijing, he suggested, had used political pressure to derail Taiwan’s plan to buy five million doses directly from German company BioNTech SE, rather than through a Chinese company that held the development rights and marketing of the BioNTech-Pfizer Inc. vaccine across China and Hong Kong. , Macao and Taiwan. Foreign Ministry spokeswoman Hua Chunying said Taipei “should stop raising political issues under the pretext of vaccination issues.”
Three months later, Taiwan pays the price for a lack of vaccines, with a spike in virus cases threatening to trigger a lockdown. Having successfully bypassed the first wave of Covid, the government is now facing a health emergency – only around 1% of its population is vaccinated so far – with the potential to disrupt the chip industry which dominates the local economy, and which is critical for an already tight global supply.
It’s a link made by the Taiwan bureau chief in New York, who warned of “logistical problems” without having access to more shots. Yet by avoiding vaccines from China and warning of further flea shortages if it cannot get enough doses elsewhere, the government is pushing the world’s largest economies even further to make investments that could erode. Taiwan’s competitive advantage in long-term semiconductors.
Taiwan’s predicament illustrates its strategic but vulnerable position at the confluence of US-China tensions. Separated by a 177-kilometer-wide strait, Taiwan is considered a province by Beijing and its conquest is President Xi Jinping’s main objective for historical and ideological reasons. The United States is an ally of the democratic government of Taipei and a big buyer of its exports, dominated by chips produced by Taiwan Semiconductor Manufacturing Co.
The emergence at the end of last year of chip shortages that hampered industries from auto to computer games had seemed to give Taipei global influence. TSMC is the world’s leading supplier of advanced semiconductors and owns 56% of the so-called foundry business manufacturing chips designed by customers such as Apple Inc. and Qualcomm Inc.
But Taiwan suffered a sudden turnaround in fortunes. The pandemic comes as a drought triggers power outages, fueling economic uncertainty and a collapse of the world’s best-performing stock index in the four years leading up to January.
Read more: The world is dangerously dependent on Taiwan for semiconductors
Moreover, the very source of Taiwan’s recent geopolitical influence – its dominance of the high-tech chip market – comes under attack as governments from the United States to Europe and Japan are alerted to the chain’s strategic nature. semiconductor supply, seek to stimulate home production. China is injecting billions into the catch-up after Washington imposed export controls on US chip technology.
“I think we’ve become too dependent on Taiwan and Korea, that’s the point, we need a more balanced global supply chain,” said Pat Gelsinger, CEO of Intel Corp., on world’s largest chipmaker, in an interview. . The United States and Europe should act “more aggressively” to counter the “imbalance” of Asia’s lead in manufacturing semiconductors that are mainly consumed in the West, he said. .
Intel is a rival and plans to challenge cutting edge TSMC, but Gelsinger isn’t the only voice making listening uncomfortable in Taiwan. Commerce Secretary Gina Raimondo said this month that while the Biden administration is working with Taipei and TSMC to address the chip shortage, it also seeks to reduce the United States’ dependence on Taiwan. TSMC is building a new manufacturing facility in the United States
Some in Washington have suggested that Taiwan is a back door to China by allowing technology transfers. Republicans Michael McCaul and Tom Cotton called on the administration to engage with Taipei to do more to “mitigate the risk of Taiwanese companies providing services and technology to affected entities,” a reference to state-backed companies. Chinese with military ties.
With the prospect of some $ 50 billion in government funding to expand chip manufacturing in the United States, and the promise to expand even more in Europe and South Korea, there are signs that Taiwan is starting to grow. feel the heat.
The government is in the process of drafting a new export control list targeting technologies for military use, tightening restrictions on exports to China and increasing the penalty for violations, according to a person familiar with the issue who called for no not be named during political deliberations.
This was after Alchip Technologies Ltd’s stock was beaten in April when the Washington Post announced it was supplying chips to Phytium, an entity affiliated with the People’s Liberation Army. Alchip said he had always been in compliance with government regulations and that the Phytium projects were on hold.
Taipei has become more aware of the possibility that Chinese companies will step up their efforts to recruit Taiwanese engineers. Last month, the Cabinet met to discuss how to prevent the outflow of local talent, with the Labor Department asking local job search websites to remove ads recruiting Taiwanese citizens to work for the China, especially in the semiconductor industry.
Businesses and headhunters can be fined up to NT $ 500,000 ($ 17,900) for advertising such jobs and NT $ 5 million for facilitating the employment of local engineers in jobs. Chinese companies on the mainland, said Huang Chiao-ting, head of the ministry. Job search site 1111 said it removed nearly 3,000 job postings. Investigators have visited the local offices of four Chinese companies, including Bitmain Technologies Ltd, over the past two months to investigate allegations that they illegally recruited engineers.
“By more aggressively investigating the efforts of Chinese companies to poach Taiwanese engineers, we hope we can help prevent potential trade secrets from leaking to China if local talent is hired,” said Judy Chen, spokesperson. word from the Hsinchu District Attorney’s Office. She declined to name the other companies surveyed.
Members of the ruling Democratic Progressive Party are considering changing the law to strengthen penalties for intellectual property theft. Lawmaker Chao Tien-lin is proposing life sentences for those convicted of economic espionage, a crime that is currently not enshrined in Taiwan’s statutes.
“Taiwan must earn the trust of its partners and help prevent China from building a supply chain out of stolen technologies,” Chao said in comments provided by his assistant.
Whether this is enough to allay concerns in Washington may become clearer with the publication of President Joe Biden’s review of the semiconductor supply chain. The 100-day review is scheduled to end on June 4. What we already know is that there is bipartisan support to build chipmaking in the United States, and Taiwan is in the crosshairs.
“Taiwan dominates semiconductor manufacturing and one company, Taiwan Semiconductor Manufacturing Company, practically controls the market,” said Sen. John Cornyn, a Republican from Texas who introduced the CHIPS for America Act to boost US production, in Senate this month.
The sustainability of Taiwan’s industry has also been called into question after suffering blackouts this month, drawing attention to environmental factors including water shortages and uncertainty over supply. future in electricity for energy-hungry chip power plants.
Read more: The chip industry has a problem with its giant carbon footprint
Taiwan has the potential to overcome the virus outbreak as well as power and water shortages, showing that its companies “can still meet global demand by manufacturing mainly in Taiwan without any problems,” said Arisa Liu, researcher at the ‘Taiwan Economic Research Institute.
In the short term, this will require vaccines. On Saturday, the chairman of Shanghai Fosun Pharmaceutical (Group) Co. Ltd., the distributor of the BioNTech-Pfizer vaccine in greater China, told China’s state-run Xinhua news agency that the company was willing to “use the vaccine for to serve his Taiwanese compatriots. . ”
But it’s unclear whether Taiwan would now agree to a vaccine deal that goes through Fosun, making it more likely that the vaccines will come from Europe or the United States. Global Health at Oregon State University, “Many politicians in Taiwan have urged the Taiwanese government to use microchips as leverage” for vaccines.
While the government is reluctant to explicitly use this leverage, he said, “If the United States is concerned about the supply of TSMC chips, the United States would be encouraged to provide Taiwan with vaccines for ensure that production will not be disrupted by this epidemic. ”
– With help from Jarrell Dillard, Nick Wadhams, Samson Ellis, Miaojung Lin and Jing Li
(Updates with the president of Fosun in the third paragraph from the bottom.)