Are your customers concerned,” one financial analyst asked Taiwan Semiconductor Manufacturing Company (TSMC) chairman Mark Liu last summer, when China from time to time threatens “a war against Taiwan?” CEOs are used to tough questions about capital expenditures and profit margins. Executives at the world’s largest producer of the semiconductors that power phones, computers, and data centers face more existential questions.
Making advanced chips requires using complex software, explosive chemicals, ultra-pure silicon, and machines costing hundreds of millions of dollars to pattern billions and billions of nanometer-sized transistors onto silicon wafers. For the past half-decade, TSMC has been the world’s leader, its engineers pioneering secret methods to pattern chips with unprecedented accuracy at unparalleled scale. TSMC has around 55% of the global market for contract chip fabrication, far above OPEC’s 40% market share for oil. And unlike the oil market, where each barrel is more or less the same, there are vast differences between types of chip. Taiwan produces almost all the most advanced processors, a market position that makes Saudi Arabia’s 12% share of global oil production look unimpressive.
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Each year, nearly a third of the new computing power we rely on each is fabricated in Taiwan. This has made TSMC one of the most valuable companies in the world. It has also left the entire world’s digital infrastructure dependent on a small island that China considers a rogue province and that America has pledged to defend by force.
The more indispensable TSMC has become to the global economy, the more risk has risen. Even investors who for years chose to ignore the growing severity of the U.S.-China antagonism began looking nervously at the map of TSMC’s chip fabs, arrayed along the western coast of the Taiwan Strait. TSMC’s chairman insists that there is no reason for concern. “As to the invasion of China, let me tell you,” he declared in 2021, “everybody wants to have a peaceful Taiwan Strait.” Taipei-born, Berkeley-educated, and Bell Labs-trained, Liu has an impeccable chipmaking record. His skill in assessing the risk of war, however, has yet to be tested. Peace in the Taiwan Strait “is to every country’s benefit,” he argued, given the world’s reliance on “the semiconductor supply chain in Taiwan. No one wants to disrupt it.”
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