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Tuesday, July 23, 2024

The semiconductor bottleneck: Mint’s analysis.

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In Short:

Taiwan is the leading force in the global chip industry, vital for its economy. While efforts globally aim to reduce reliance on Taiwan, its technological advancements keep it ahead. Taiwan is investing in AI, chip design, and attracting intellectual property. Threats like aging population, energy consumption, and China’s actions loom, but Taiwan’s resilience and strategic planning could safeguard its chip empire.


The Taiwanese Chip Industry: An Invaluable Resource for the World

Diversification is key for almost everyone, except for **Taiwan**. The island faces economic and security threats if it loses its dominance in the chip industry. A decline in the industry would not only make Taiwan poorer but also strategically less important, potentially making it easier for **China** to invade without risking its chip supply. Recognizing this, Taiwan is doubling down on efforts to ensure its indispensability in the global chip market. C.C. Wei, the CEO of **TSMC**, emphasized the importance of Taiwan’s chip industry, making it clear that Taiwan is the top priority.

The ‘Sacred Mountain’ of Taiwan

Fondly referred to as the “sacred mountain that protects the nation” by locals, Taiwan’s chip industry holds a stronghold in the global market, producing more than 90% of the most advanced semiconductors. **TSMC**, Taiwan’s leading firm, plays a pivotal role in this market, accounting for a significant portion of the island’s GDP and exports. The industry’s dominance is crucial for the Taiwanese economy.

The Global Shift and Taiwan’s Response

As countries worldwide strive to reduce their dependence on Taiwan, the island is taking proactive measures to maintain its position. Initiatives like the 2022 chips Act in the US are aimed at establishing domestic chip production. Despite this push for diversification, **TSMC** remains resolute in keeping the majority of its production capacity within Taiwan. The company’s focus on advancing technology puts it ahead of potential competitors.

Looking Towards the Future

Taiwan’s chip industry is not resting on its laurels. With a strong emphasis on AI and chip design, the island is aiming to solidify its position as a leader in advanced technology. Government incentives and strategic planning are geared towards expanding Taiwan’s influence in the global chip market and attracting top talent to the island.

Challenges on the Horizon

Despite its resilience, Taiwan faces challenges such as energy consumption, an aging population, and geopolitical tensions. The threat of war looms over the chip industry, emphasizing the need for strategic planning and contingencies to safeguard Taiwan’s technological prowess.

**Taiwan** continues to be a central player in the global semiconductor industry, navigating through challenges and uncertainties with a focus on innovation and adaptation.

© 2024, The Economist Newspaper Limited. All rights reserved.

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