How Silicon Valley looks at the Taiwan miracle (3): Competitiveness is the best survival strategy

Colley Hwang, DIGITIMES Asia, Taipei 0


Issues that might be taken for granted in other countries may be matters of life and death in political discussions that don't allow any middle ground. Will 2024 see the last presidential election in Taiwan? If China sees zero economic growth, the likelihood of a military invasion of Taiwan will be even higher. On the face of it, Taiwan is in a difficult position with no room for maneuvering, but looking back on the past half-century, isn't that how Taiwan has survived? The more difficult the times, the more abundant and diverse the opportunities for development.

The US scholars who participated in the Silicon Valley conference believe that semiconductors are a good card that Taiwan can play while in the spotlight, but everyone has his or her opinion about how this card can be played. The US and Taiwan may have different ideas how this card can be made to work longer and more effectively. It seems that the Taiwanese government's propositions can hardly get off the drawing board, and all kinds of proposals may face difficulties in getting through. Can TSMC have its own way? Can the US and Taiwanese governments demand that TSMC withdraw its investment in China?

The world is a very different place than it was five years ago, and the traditional management mechanisms of the US government are no longer fully applicable. China is using information technology to control the movement of its people. We've seen that in many cases, such as COVID lockdowns. Companies use QR codes to monitor the public transportation that their commuting employees use, and if you have no alternatives, that means you're being watched by "Big Brother" - a human rights issue.

Firms in China don't have trade unions, and instead there are communist party branches. Xu Chenggang, an economist who participated in the Silicon Valley discussion, noted that HSBC has seen its employees in China set up a communist party branch, and now it is uncertain who really controls the bank.

It is rare for a core industry to play the role of a guardian of a country, but for semiconductors to play such a role to its extreme for Taiwan, it is even rarer.

Taiwan's value-added in the semiconductor industry is about 13% of the country' GDP. In the first half of 2022, South Korea's trade surplus in semiconductors was US$67 billion, but taking semiconductors off the statistics, South Korea's trade deficit would have been over US$100 billion. Taiwan's trade surplus in semiconductors alone was higher than the deficit in all other industries in 2021. If semiconductors were gotten rid of in Taiwan's and South Korea's economy, what would become of the two countries?

No one dares to call the US's bluff. If you don't have a deep understanding of the industry, how can you find the most suitable strategy for Taiwan's deployments and operations from among all the tiny differences on the surface?

(Editor's note: This is part of a series of articles DIGITIMES Asia president Colley Hwang wrote about his observations during a recent trip to Silicon Valley.)

Colley Hwang, president of DIGITIMES Asia, is a tech industry analyst with more than three decades of experience under his belt. He has written several books about the trends and developments of the tech industry, including Asian Edge: On the Frontline of the ICT World published in 2019, and Disconnected ICT Supply Chain: New Power Plays Unfolding published in 2020.