An analyst at a think tank in Taiwan is advocating that the country joins the global semiconductor supply chain alliance against China, as a way of maintaining its technological advantage and national strategic security.
Wang Che-jen, an assistant research fellow at the government-funded the Institute for National Defense and Security Research (INDSR), said in a recently published paper that the current shortage of automotive chips has highlighted Taiwan’s strategic place in the global semiconductor industry.
The shortage shows that the supply chain for such products has become a matter of diplomatic, security and strategic concern, Wang said in the paper, titled “Automotive chip shortage: A look at Taiwan’s strategic place in the semiconductor supply chain.”
According to recent media reports, automakers in the United States, Germany and Japan have been appealing, through diplomatic channels, for Taiwan’s semiconductor plants to increase output to help alleviate the chip shortage.
Automotive chips are widely used in engine management, ignition, transmission electronics, in-car entertainment, and sensor systems, among other areas.
The shortage of auto chips became apparent last December, after major automobile manufacturers cut orders earlier in the year amid plunging demand due to the COVID-19 pandemic, Wang noted.
With the recent recovery of the automobile market, demand for auto chips has spiked, he said, adding that car sales in China alone are expected to reach 27 million units in 2021.
One of the ways technologically advanced nations are tackling the problem is by luring foreign chipmakers to set up plants in those counties, Wang said.
The American and Japanese governments, for example, have invited Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker, to build facilities in their countries, he noted.
Wang, however, warned against such a move, saying that while it may help to shorten the global supply chains, it may also weaken Taiwan’s strategic advantage in the semiconductor industry.
“For Taiwan to maintain its ‘silicon shield,’ it needs to persuade the European countries and the U.S. that keeping TSMC in Taiwan is the best option,” he wrote.
The concept of a “silicon shield” describes Taiwan’s strategic position in the technology supply chain as a shield against any attack by China.
Wang also warned that Taiwan should beware of China’s efforts to poach talent, given the latter’s goal of becoming 70 percent self-sufficient in chip production by 2025.
“Judging from the past experience, China’s poaching efforts will only increase,” he said.
According to a report in the Nikkei Asian Review in August 2020, China succeeded in luring more than 100 TSMC engineers in the span of just one year, offering them double the amount they were earning in Taiwan.
China has redoubled its efforts to develop its semiconductor industry, since U.S. sanctions have restricted its ability to acquire semiconductor chips, Wang said.
Meanwhile, the American semiconductor industry has been urging the new administration of U.S. President Joe Biden to form a semiconductor alliance with like-minded countries to prevent tech espionage by China, he said.
The Taiwan government should guide the country’s tech companies to join such an alliance, in order to protect Taiwan’s technological advantage and national strategic security, Wang said.
Originally published at Focus taiwan