Tag: TSMC

Understanding Taiwan

A student recently got in touch asking about what he should read when it comes to understanding the current dynamics of Sino-Taiwanese relations.

This blog post is, in a sense, an answer to his question, but also a bookmark-worthy resource for me. And hopefully for you as well!

  • I’d recommend one beings by trying to understand Taiwan: it’s history, it’s society, it’s culture. And a good primer to begin with would be this blogpost by Tanner Greer.
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    “The fact is that younger generations of Taiwanese, including the grandchildren of the waishengren have no memory of pre-communist China, have only distant relatives there, and have spent their entire lives living in freedom. This is an environment where the use of Taiwanese Hokkien is encouraged and Taiwanese nationalism has flourished. Thus very few people under 45 consider themselves Chinese.”
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  • For additional reading, I heavily recommend this post by Noah Smith:
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    “Taiwan has one of the most progressive societies, if not the most progressive, in Asia. It was the first Asian country to legalize gay marriage, and sports a vibrant gay culture. Taiwan ranks as one of the most gender-equal societies in the world, equivalent to Norway and higher than France on the commonly used GII scale. The President, Tsai Ing-Wen, is a woman, and women make up 42% of the legislature. The country has actively pushed for gender equality in business, and the gender pay gap, at 14% in 2018, is smaller than in the U.S.”
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  • Taiwan is big on democracy (and if you read Greer’s post linked to above, you will begin to understand why), and Taiwan is a good way to start to learn more about digital democracy. A useful way to begin would be to learn more about Audrey Tang. Listen to these two podcasts as well in this regard: the first one is with Azeem Azhar, and the second with Tyler Cowen.
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  • Now, a post written in 2022 has to be about Sino-Taiwanese relations, right? The Wikipedia article about Cross-Strait relations is a good place to begin, and you may want to read this Wikipedia article too. (And while you’re at it, this one too!)
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  • And it also has to be about semi-conductors, and that one company in particular. Read this briefing from The Economist as well, along with this essay by Pranay Kotasthane. One thing I have realized is that I haven’t read books about the emergence of the semi-conductor industry in general, and about TSMC in particular. If you have any recommendations, please send them my way. Thank you.
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  • And after all that, perhaps one can then delve deeper into the issue that my student really wanted to get at: present-day geopolitics and strategy. Edward Luttwak on Twitter is an excellent source of information, and this essay by him is good reading. Tyler Cowen’s essay in Bloomberg is also good reading in this regard. And in a slightly older essay, Greer thinks through the implications of America not doing so well in a all-but-inevitable conflict with China over Taiwan.
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  • If you are an Indian reading this blogpost, and are curious about how to think about this conflict from an Indian viewpoint, here are articles you might want to start out with. Here’s Nitin Pai on the issue, here is Shyam Saran, and here is an interview with Pranay over on Scroll on related issues.
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  • What else? Well, follow Constantino Xavier on Twitter, and also Hamsini Hariharan, Ananth Krishnan (who also has a Substack on Indo-Chinese relations) and Manoj Kewalramani (ditto). Also Vijay Gokhale! Here is Takshashila Institute’s page on Taiwan, try this search link on for size too.
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  • Finally, try using game theory to think through the implications? Use this as a starting point, but have fun (well, as much fun as is possible given the topic!) coming up with outrageous theories, and thinking through the consequences in game theoretic terms.
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    There must be a million other things I could have linked to but didn’t. I look forward to adding more, so don’t hesitate to send in links to help that student of mine. Thank you in advance!

Taiwan, China and TSMC

Let’s say you knew nothing about Taiwan, China and TSMC. Where to start?

You don’t really hear about Taiwanese pop music, TV, or other pop culture. Taiwanese food exists, but except possibly for bubble tea, most Americans probably wouldn’t recognize it.
This seems like something that ought to change. Most importantly, because Taiwan seems really cool. But also because it’s geopolitically important, because it’s probably the most likely flashpoint for great-power war.

https://noahpinion.substack.com/p/taiwan-is-a-civilization

Flashpoint for a great power war? Unfortunately, yes:

Taiwanese President Tsai Ing-wen’s election in January 2016 upended Beijing’s plans for reconciliation with the Nationalists. Tsai, whose Democratic Progressive Party was founded on the promise of independence, refused to accept Ma’s position that both sides belong to “One China.” Beijing responded by cutting off communication, curbing travel and resuming efforts to lure away Taiwan’s few remaining diplomatic partners. Beijing has also withdrawn its support for Taipei’s participation in global bodies such as the World Health Assembly and pressured airlines, retailers and other multinationals to revise policies that treat Taiwan as a country. More recently, the People’s Liberation Army has stepped up exercises around the island, including “encirclement patrols” and incursions into Taiwan’s air defense identification zone.

https://www.bloomberg.com/news/articles/2021-01-27/why-taiwan-is-the-biggest-risk-for-a-u-s-china-clash-quicktake

Ok, so that would be worrying, but a great power war? Because of chips. Microchips, to be more precise. And manufactured by a firm that you may not have read of: TSMC. Don’t blame yourself if you haven’t heard of it – and even if you have heard of it, this chart will still be informative:

Original Article in The Economist is here.

I don’t know about you, but I was amazed by that chart.

From that same article, here is additional information about the firm:

The most important firm in this critical business is Taiwan Semiconductor Manufacturing Company (TSMC). It controls 84% of the market of chips with the smallest, most efficient circuits on which the world’s biggest technology brands, from Apple in America to Alibaba in China, rely to make their snazzy products and services possible. As demand for the most sophisticated chips surges thanks to the expansion of fast communication networks and cloud computing, TSMC is pouring vast additional sums of money into expanding its dominance of the cutting edge.

https://www.economist.com/business/2021/04/26/how-tsmc-has-mastered-the-geopolitics-of-chipmaking

By the way, the story of the founder is fascinating in its own right:

Read the whole thread, of course, but also note that you should also really read… and stop me if you have heard this from me before… How Asia Works by Joe Studwell.

Now, about China and the TSMC:

First, read this article for some useful background. Second:

Some experts claim that China now has the military capacity to quickly overwhelm Taiwan. Even if this is correct, invasion remains a high-risk endeavor that, even if successful, would still entail major negative ramifications for China. It can be expected only in conditions under which China’s leaders see the immediate political stakes outweighing the military risks, implying a narrow range of scenarios.

https://thediplomat.com/2020/12/would-china-invade-taiwan-for-tsmc/

The rest of the article goes on to explain the supply chain considerations in light of a war. And they’re very real indeed!

On January 13th Honda, a Japanese carmaker, said it had to shut its factory in Swindon, a town in southern England, for a while. Not because of Brexit, or workers sick with covid-19. The reason was a shortage of microchips. Other car firms are suffering, too. Volkswagen, which produces more vehicles than any other firm, has said it will make 100,000 fewer this quarter as a result. Like just about everything else these days—from banks to combine harvesters—cars cannot run without computers.

https://www.economist.com/business/2021/01/23/chipmaking-is-being-redesigned-effects-will-be-far-reaching

Finally, read this for further details. (Long, but very detailed, and therefore very interesting)

If you are a student of economics in 2021, this is one story you want to keep an eye on, apart from the other, obvious ones.