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IC Industry at Heart of Possible China Takeover of Taiwan

Daniel Nenni

Admin
Staff member
Combined, China and Taiwan would hold about 37% of global IC capacity, almost 3x that of North America.

IC Insights’ October Update to The McClean Report, to be released later this month, draws upon information contained in its Global Wafer Capacity 2021-2025 report to discuss the current high tension environment between China and Taiwan and what it could mean for the IC industry.

In IC Insights' opinion, healthy future global economic growth is increasingly dependent upon the continued introduction of advanced electronic systems. The critical components within these systems are integrated circuits (ICs), without which, advanced electronic systems cannot be produced.

The ongoing trade conflict between the U.S. and China has intensified over the past couple of years. Crippling trade sanctions, especially with regard to IC technology, that the U.S. has imposed on Huawei, China’s largest electronics company, and to a lesser extent on SMIC, China’s largest indigenous IC foundry, has, in IC Insights’ opinion, caused China to question how it will be able compete in the future IC and electronics industries. It is increasingly apparent that China’s answer to that question centers on its reunification with Taiwan.

Just how important is the small island nation of 24 million people to the IC industry? Consider the following excerpts from IC Insights’ Global Wafer Capacity 2021-2025 Report and the 2021 McClean Report:

• As of December 2020, Taiwan held the largest share of IC industry capacity of any country or region in the world. Moreover, if combined, the share of IC capacity within the borders of China and Taiwan would represent about 37% of global IC capacity, about 3x the amount of IC capacity located in North America.

• Led by TSMC, Taiwan by far holds the largest share of leading-edge (i.e., <10nm) IC capacity (63%) of any country in the world (Figure 1). South Korea, represented by Samsung, holds the remaining 37%.

unnamed (4).png


Figure 1

• Taiwanese companies hold almost 90% of Taiwan’s total IC capacity. The only non-Taiwanese IC fabs located in Taiwan are a small 150mm fab owned by U.S.-based Diodes and two advanced 300mm DRAM fabs owned by Micron (Fab 11 in Taoyuan with a capacity of 108K wafers per month and Fab 16 in Taichung with a capacity of 100K wafers per month).

• Taiwan holds 22% of the world’s 300mm IC capacity, second only to South Korea, which holds a 25% share. In contrast, North America possesses only an 11% share of global 300mm IC capacity.

• About 80% of Taiwan’s total IC capacity is dedicated to foundry production. Moreover, Taiwan’s pure-play foundries (i.e., TSMC, UMC, Powerchip, Vanguard, etc.) are forecast to represent almost 80% of the total worldwide pure-play foundry market in 2021.

The bottom line is that, currently, there is no more important base of IC capacity and production than Taiwan. Moreover, China has a huge problem with its inability to produce leading-edge IC devices for its future electronic system needs—a problem that it believes can be solved through reunification with Taiwan by whatever means necessary.

While the Taiwanese economy would crater if China attempted a military takeover of the island nation, China’s economy would also suffer greatly. The question is whether China is willing to accept relatively short-term economic pain for the long term benefit of having the largest amount of the world’s leading-edge IC production capacity under its control for many years to come.

Report Details: The 2021 McClean Report
The 2021 edition of The McClean Report—A Complete Analysis and Forecast of the Integrated Circuit Industry was released in January 2021. A subscription to The McClean Report includes free monthly updates from March through November (including a 180+ page Mid-Year Update), and free access to subscriber-only pre-recorded webcasts through November. An individual user license to the 2021 edition of The McClean Report is available for $5,390 and a multi-user worldwide corporate license is available for $8,590. The Internet access password and the information accessible to download will be available through November 2021.

Report Details: Global Wafer Capacity 2021-2025
IC Insights’ Global Wafer Capacity 2021-2025—Detailed Analysis and Forecast of the IC Industry’s Wafer Fab Capacity report assesses the IC industry’s capacity by wafer size, minimum process geometry, technology type, geographic region, and device type through 2025. The report includes detailed profiles of the companies with the greatest fab capacity and gives comprehensive specifications on existing wafer fab facilities. Global Wafer Capacity 2021-2025 is priced at $4,890 for an individual user license. A multi-user worldwide corporate license is available for $7,590. The Internet access password and the information accessible to download will be available through November 2021.

https://www.icinsights.com/services/global-wafer-capacity/pricing-order-forms/

More Information Contact
For more information regarding this Research Bulletin, please contact Bill McClean, President at IC Insights. Phone: +1-480-348-1133 email:bill@icinsights.com

PDF Version of This Bulletin
A PDF version of this Research Bulletin can be downloaded from our website at https://www.icinsights.com/news/bulletins/
 

hist78

Well-known member
"While the Taiwanese economy would crater if China attempted a military takeover of the island nation, China’s economy would also suffer greatly. The question is whether China is willing to accept relatively short-term economic pain for the long term benefit of having the largest amount of the world’s leading-edge IC production capacity under its control for many years to come."

There are serious flaws with the above summary or observations:

1. Modern wars are very destructive. An invasion into Taiwan will lead to serious damage to fabs and economy not only in Taiwan but also in mainland China. Taiwan will surely make military and economic retaliation. Frankly, I don't see any way PRC can effectively defend their own military and civilian installments. For example, SMIC and Shanghai are located well in the Taiwan's missile range.

2. The author probably assumed those semi equipment can be replaced easily. But PRC is having difficulties today to procure advance semiconductor equipment from ASML, Applied Materials, and Tokyo Electron. Why CCP starts a war will remove all those obstacles they are facing even in a peace time?

3. The author assumed that Taiwanese economy would crater while PRC's will also suffer greatly but it's relatively a short term thing. I believe PRC's economy will crater too and it will be a long and lasting crash. Among PRC's top 10 trading partners, US, Japan. South Korea, Taiwan (of course) and Australia won't be sitting idle. The recent PRC failed attempt to embargo Australia's coal is a vivid reminder that PRC's economy is actually very fragile and it depends so much on international trade.


PRC Trading Partners 2018.JPG

Source: https://en.wikipedia.org/wiki/List_of_the_largest_trading_partners_of_China

4. A war against Taiwan by PRC will surely trigger international military and economic intervention. But it might not be necessary. PRC knows all their east coast provinces are under Taiwan's missiles range. They certainly will know it means majority of Chinese economic engines are under Taiwan's retaliation from land, sea, and air. Taiwan's possible action alone can make PRC to pause and to think about it for another 20 years.

Taiwan_missiles_web.jpg


Source: https://missilethreat.csis.org/country/taiwan/
 
Last edited:

Daniel Nenni

Admin
Staff member

peter

New member
seems unlikely. not that they don't have the technical know-how to actually build one, but without testing and a proven delivery method, unlikely. and it would appear they have much more to lose proportionally being confined to a small island whereas PRC could probably care less if a few of its cities was hit.
 

Arthur Hanson

Well-known member
War or military action would be a staggering waste of resources and damage to the world economy. If China pursues this action, everyone will lose, but especially China. Their lack of judgement would make them an isolated pariah with few if any friends and give the rest of the world severe doubts about their intentions matching their actual actions. China has little to gain and staggering losses of many types, both political and financial if they engage in a conflict. I don't think their economy or political system would survive intact if such a conflict were to occur. It is far, far cheaper for China to be a TSM customer than engage in a conflict. Even if they won, it would be a very costly victory with little upside and staggering downsides.
 

Paul2

Active member
I wonder if Taiwan is pursuing nuclear missiles on the down low? They have reactors on both ends of the island.


Nuclear capabilities would seem to be a pretty big deterrent but I still think the Silicon Shield around Taiwan will hold up.

They did, their modern nuke project aka "Golden Path Project" under Chen was sunk with his embezzlement charges.
 

mozartct

Member
@Arthur Hanson I add that even assuming the very unlikely scenario of a non-destructive takeover of Taiwan, sabotage would quickly cripple whatever remaining IC capacity. Fabs are fragile objects not hardened against internal threats - see Wannacry or the photoresist switchero at tsmc. just use your imagination. China may invade Taiwan for internal-to-them political reasons but dominance over IC production would not be one of them.
 

soAsian

Member
I wonder if Taiwan is pursuing nuclear missiles on the down low? They have reactors on both ends of the island.


Nuclear capabilities would seem to be a pretty big deterrent but I still think the Silicon Shield around Taiwan will hold up.
Taiwan tried but US shut it down.

 

hist78

Well-known member
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