Is TSMC transforming as casus belli?

Ominous statements are on the roll today. Taiwan Semiconductor Manufacturing Company (TSMC) remained for all these days a bone of contention between America and China. Suddenly it has morphed into a casus belli, if we are to believe the statements coming out from America. The tone is threatening and the words are frightening. Read for more:

Main stream media is barking a lot now. “It is the duty of USA to protect democracy, freedom and sovereignty of Taiwan”. But here is the bite” Taiwan cannot make decision on her own for the rest of us (meaning USA)”. This one liner exposits more: “We should destroy before China gets into Taiwan”. Final nail on the coffin is slated thus: “We should plan destruction of Taiwan by using scorched earth business strategy.”

For naked eye it could appear as bluster or brinkmanship. One thing is certain there is a change of tack in the American thinking. There could be possible security threats of Taiwan microelectronics supply chains if TSMC falters.

It began with Chips Act where America persuaded Taiwan to relocate TSMC production base to US mainland. Construction of Arizona Fab 1 costing US$ 12 Billion was the first to be implemented. Second one Fab 2 is being proposed adding another US$ 16 Billion. This is yet minuscule compared to what TSMC has in the forms of manufacturing assets in Hsinchu, Taiwan.

But this de-location into USA brought howling within Taiwan itself. The opposition Kuomintang party protested loudly stating that this move tantamount to denuding of local assets and encouraging brain drain as the staff who are to man Fabs in America have to be drawn from the existing cadre. Specialised techno staff in microelectronics are hard to come by therefore Taiwan cannot afford to lose this vital human resource.

At the macro level, there is gradual groundswell within Taiwan to disavow hostilities with China. Tsai Ing-wen led Democratic Progressive Party (DPP) see the wiring in the wall as opposition Kuomintang party is rising in popularity. The Presidential election is scheduled to be held on January 13, 2014. Eric Chu Chairman of Kuomintang who favours re-unification with China is expected to sweep the results. So the time window is just below 8 months.

Recent cancellation of China orders of US$ 129 Billion of microelectronics import rattled TSMC as its 47% manufacture is destined to China. It rang alarm bells in the White House too. Fearing the loss of revenue Taiwan industry may possibly shift gear for accommodation with Taiwan, is the immediate concern to policy makers in US administration. Of particular interest is TSMC which can make a soft coup in persuading Tsai Ing-wen to reduce her hostile posture towards China and be somewhat lukewarm towards America.

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist