TSMC founder says 'globalization is almost dead' as Asian foundry giant expands in US
A sober reflection on the industry as supply chains bifurcate in the East and West
Comment Caught in the middle of an escalating trade war between the US and China, the founder of Taiwanese contract chip-making giant TSMC has stated that globalization and free trade are "almost dead" as his company expands in the US for the first time in over 20 years.
Morris Chang reportedly made the comments at Tuesday's ceremony for TSMC's advanced chip manufacturing site in Arizona, where the company plans to spend roughly $40 billion to open a 4nm fab in 2024 and a more sophisticated 3nm plant in 2026. The company said the Arizona fab plan represents "one of the largest foreign direct investments in the history of the United States."
"Twenty-seven years have passed and [the semiconductor industry] witnessed a big change in the world, a big geopolitical situation change in the world. Globalization is almost dead and free trade is almost dead. A lot of people still wish they would come back, but I don't think they will be back," said Chang, according to Japanese newspaper Nikkei and other news reports.
It's one of the blunter statements offered in the semiconductor industry lately. For it to come from the founder of the world's most advanced, and second-largest, chip manufacturer, which makes silicon designed by major Western firms like Qualcomm and Nvidia, is a sober reflection on the industry's state of affairs as US chip sanctions against China create a bifurcation of supply chains.
Growing export restrictions led by the US against China are forcing the Asian nation to alter chips and double down on homegrown technologies that can replace components, tools, and materials it can no longer access. We've seen this play out in multiple ways in recent months, with China enlisting domestic tech giants Alibaba and Tencent to develop RISC-V chips as one example.
Russia is in a similar situation with US sanctions after it illegally invaded Ukraine earlier this year, and it has turned to China to replace Western-made chips in some cases.
While recent US export controls against China are aimed at curbing the Middle Kingdon's economic and military power, the sanctions' impacts are reverberating across the world, affecting many companies, including those in the West, that sell into China, buy from Chinese firms, or run operations in the country.
TSMC has steered clear of at least one aspect of American's sanctions, at least for now. As the US announced new export restrictions against China for advanced chips and chip-making tools, the contract chip manufacturer was granted a one-year exemption by Uncle Sam so that it can keep buying US chip-making equipment for its plant in Nanjing, China that makes less advanced silicon.
However, US sanctions have compelled TSMC to pivot in other ways. This has mainly been seen with TSMC customers, such as Chinese chip designers Alibaba and Biren Technology, who were forced to halt production of new GPUs so that they could reduce their processing speeds to get around US sanctions.
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But US sanctions aren't the only reason TSMC has found itself in a peculiar place.
While TSMC makes a US expansion that is heavily sought by Apple and other major American customers, the company is facing concerns that China could invade Taiwan and take over its fabs there, where most of its production happens.
In August, TSMC Chairman Mark Liu said "nobody can control TSMC by force" and that an invasion would render the company's factories in Taiwan "non-operable." That's because Taiwan-based TSMC production facilities "depend on the real-time connection with the outside world: with Europe, with Japan, with the US," Liu added. Plus the Taiwanese might be planning to destroy the fabs anyway.
These tensions, combined with concerns about an over-reliance on Asia for advanced chips, are one reason why several companies and government officials are pushing for more chip manufacturing plants not just in the US but Europe. India, too, sees an opportunity to begin a new chip-making hub.
In the meantime, TSMC reportedly plans to keep its Taiwan-based fabs perpetually one step ahead of its American plants in advanced chip-making capabilities. This means the US will likely need to rely on its largest domestic chipmaker, Intel, to eventually put America in the top position for state-of-the-art process technologies, but that rests on whether the x86 giant can execute on its comeback plan. Whether South Korea's Samsung can aid with America's goal to become No. 1 is another question.
As Chang said, the tech industry may never look the same again, and one major reason for that is the world has woken up to the importance of chips in modern life. ®