Imagine a World Without New Semiconductors and Microchips

A slowdown in the production of new cars due to a lack of microchips may be just a taste of what the future holds. Chips are a huge potential weakpoint in the global supply chain.

The Wall Street Journal just published the article “The World Relies on One Chip Maker in Taiwan, Leaving Everyone Vulnerable” about how Taiwan Semiconductor Manufacturing Company (TSMC) makes most of the chips in use today, and 92 percent of the world’s most sophisticate chips. They frequently manufacture chis for other companies, including Apple, Qualcomm and others.

This quote from the article gets to the cusp of the matter:

“Its dominance leaves the world in a vulnerable position, however. As more technologies require chips of mind-boggling complexity, more are coming from this one company, on an island that’s a focal point of tensions between the U.S. and China, which claims Taiwan as its own.

Analysts say it will be difficult for other manufacturers to catch up in an industry that requires hefty capital investments. And TSMC can’t make enough chips to satisfy everyone—a fact that has become even clearer amid a global shortage, adding to the chaos of supply bottlenecks, higher prices for consumers and furloughed workers, especially in the auto industry.

The situation is similar in some ways to the world’s past reliance on Middle Eastern oil, with any instability on the island threatening to echo across industries. Companies in Taiwan, including smaller makers, generated about 65% of global revenues for outsourced chip manufacturing during the first quarter of this year, according to Taiwan-based semiconductor research firm TrendForce. TSMC generated 56% of the global revenues.

Being dependent on Taiwanese chips “poses a threat to the global economy,” research firm Capital Economics recently wrote.”

In other words, TSMC is potentially a weak point in the supply chain for millions of products we rely on every day.

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