Taiwan’s chip fabricators -- four Taiwanese trade groups and three nonprofit organizations representing the whole of Taiwan’s high-tech industry -- signed an agreement on December 3 to create their own semiconductor equipment industry, opening an “option to decouple from the West,” in the view of a prominent US research firm. Habor Hsu, Chairman of the Taiwan Machine Tool and Accessory Builders Association, was quoted by the Taipei Times as saying “We have a world-leading semiconductor industry in Taiwan, but 90% of our semiconductor manufacturing equipment is imported. In the wake of Covid-19 and the US-China trade dispute, international businesses will change where and how they make their products.” Industry analyst Dan Hutchison of the semiconductor research group VSLI wrote on December 8 that a home-grown chip equipment industry “would make it possible for Taiwan to decouple from the West. Worse, it points to a post-globalization world heading to a dark age of over-supply, fractured R&D resources and low innovation.” On December 9, the Wall Street Journal reported that the US Defense Department wants to stop China’s largest chipmaker, SMIC, from purchasing American machines. Taiwan’s chip producers want to maintain their leadership in China’s domestic chip fabrication and will build their own chip-making equipment to prevent US sanctions from slowing their investments on the mainland. The two top providers of chip-making equipment, Applied Materials and LAM, both are American. Tokyo Electron, Japan’s largest equipment maker, increased its China sales from 50 billion yen ($441 million) in 2015 to 400 billion yen this year. China has responded with a crash effort to build its own chip fabrication, concentrating on the “workhorse” sector of 14 nanometers and above. The 3-nanometer to 7-nanometer chips that power 5G smartphones require extreme ultraviolet lithography, with equipment produced only by Holland’s ASML. Washington has blocked access to this equipment.
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