Taiwan is indispensable in global chip-making, yet the island nation is under threat from geopolitical forces and internal pressures like declining birth rates, environmental challenges, and a skewed talent market.
Konrad Young, former R&D director at TSMC, warns of the risks posed by the geopolitical environment, particularly the concentration of over 90% of wafer production in East Asia. "The US aims to mitigate this risk by encouraging TSMC to establish fabs on American soil," he says.
However, he argues that this move could increase costs for TSMC. "We need to find complementary, win-win cooperation models with the US, leveraging our manufacturing strengths while acknowledging America's lead in cutting-edge technology."
The semiconductor landscape is rapidly evolving, with countries worldwide vying to secure manufacturing capabilities through hefty subsidies. However, Young is critical of subsidies like those provided under the US CHIPS and Science Act.
"Subsidies are the worst investments if not applied judiciously," he asserts. "Investing in the early stages of technology development yields far better returns than mature-stage subsidies. It's about creating platforms and leverage, not just pouring money into already successful ventures."
A potential 100% market share for Taiwan is not necessarily a good thing, Young cautions. "TSMC's focus has always been on running faster. We don't need to worry about competitors like Samsung overtaking us since their IDM model differs vastly from our foundry model, which thrives on diversity and flexibility—traits large Korean firms lack."
The US-China conflict transcends partisan politics, indicating a stable trajectory regardless of election outcomes. Young believes China must forge its path within the semiconductor ecosystem, benefiting from its vast domestic market despite global supply chain shifts.
Taiwanese firms, according to Young, should continue tapping into the Chinese market under US regulatory frameworks. "Selling mature or low-end chips to China, where allowed, makes business sense. Strategic compliance with regulations, such as adhering to the "Entity List," ensures we can exploit market opportunities without legal repercussions."
Young sees immense potential for non-US geopolitical cooperation, especially in Europe. "There's a palpable anxiety in Europe about finding their place in the semiconductor industry. Taiwan can collaborate with these markets, leveraging opportunities without undermining our competitiveness."
However, Taiwan lags in research security. Young criticizes past inefficiencies in government-supported academic research and calls for better integration and leveraging of overseas talent and collaborations. He advocates for a global R&D center to attract and incubate international talent, enhancing Taiwan's innovation capabilities.
Despite being a talent hub, Taiwan faces significant challenges in its semiconductor industry due to a lack of frontier research talents, according to Young. While South Korea is a close competitor, it doesn't match Taiwan's flourishing talent landscape. Japan, on the other hand, struggles with a generational talent gap that hinders its semiconductor resurgence.
Domestically, Taiwan's talent market is heavily skewed towards the semiconductor sector, which hampers the development of other industries, underscoring the need for a more balanced and diversified talent strategy.
Hence, Young promotes cross-disciplinary and cross-generational talent development, particularly in ESG-related industries, which is crucial. Within Taiwan, the sector grapples with severe shortages—of labor, water, land, and energy—which pose substantial hurdles to sustainable growth. Balancing industrial growth with environmental sustainability and energy issues is another pressing concern.
Taiwan's semiconductor industry stands at a crossroads, with geopolitical dynamics and internal challenges shaping its future. As the world watches, the decisions made today will determine Taiwan's position in the global semiconductor hierarchy tomorrow.
