Combined, China and Taiwan would hold about 37% of global IC capacity, almost 3x that of North America.
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, according to IC Insights, in its upcoming October Update to The McClean Report.
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:
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%.
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.