Over the past 30 years, one-third of the global economic momentum has come from China. This has been China's positive contribution for the world. However, behind China's moves of bringing in foreign capital and leveraging its domestic market is its techno-nationalistic agenda manifested in the form of Belt-and-Road expansion. Such an agenda has raised grave concern in the US-led Western camp, which believes it is a severe challenge to Western capitalism.
It is an established national policy of the US to rebuild the local semiconductor supply chain. US secretary of state Antony Blinken and secretary of the treasury Janet Yellen have both emphasized that the reliance on Taiwan for over 90% of the most sophisticated semiconductor chips is a national security issue for the US. But not allowing semiconductors to become a "silicon shield" will also be a national security issue for Taiwan.
In the past, the supply chain was characterized by linear mass production; but in the future, it will move towards decentralized production systems catering to differentiated demands. The more complex the products, the more opportunities. Taiwan is small and densely populated, and its industry is concentrated north of Hsinchu, which facilitates communication and transportation. Tech giants rely on Taiwanese companies' supply chains and components. Whether it is to move production to Southeast Asian countries or to sell auto parts to Taiwan from Europe and the US, working with Taiwan is the best solution.
"The Art of War" maintains that if you don't see chances of winning, you defend. While India is actively pursuing foreign investment and accelerating the establishment of its tech supply chain to reduce reliance on imports, ASEAN countries whose economy is not strong enough should team up with Taiwan to form a defensive position. This is also true for Taiwan.
The "Art of War" maintains: If you don't see chances of winning, you defend; and if you do see chances of winning, you attack. The Indians believe that their market has the greatest potential, and that the lack of foreign investment is down to investors' lack of vision. The Indians are taking up a defensive position. But in the next decade, the US-China confrontation may be opening up the best opportunity for India in half a century, and if it continues to adopt a defensive position, India will be doomed to miss out again.
The "Art of War" maintains that if you know the date and place of the battle, you can be well-prepared for it even if your troops have to march a thousand miles before engaging the enemies. The International Monetary Fund (IMF) has given us a framework for thinking about the future: In 2030, there will be a reshuffle of the rankings of the world's biggest economies. But if there are human interventions, how can we look at the unknown future?
Sun Tzu's "The Art of War" maintains that you "shape" the battle and your enemy will have to play along. By having competitors and even strategic partners play within a pre-determined framework, the winner is the one who controls the game.
Sun Tzu's "The Art of War" maintains that troops start out with their own country's supplies and then get replenishments from the enemies. Taiwan may be small, but it can make use of different strategies. We may still get inspiration from the wisdom of 2,500 years ago.
Sun Tzu's" Art of War" maintains that a good warrior relies on his or her ability to take advantage of the situation to win the war rather than on the efforts of others. A small country cannot control the game, but it can still take advantage of the situation and find a way to respond to it.
Yes, I believe that the next two years will be a subdued period for the industry. But I also believe that Taiwan is one of the few major industrial ecosystems in the world that can rely on the business integration to prepare for opportunities coming its way.
Nouriel Roubini has sounded warnings for the next two years. Several days ago, when I attended an industry gathering, a friend of mine also lamented that there was too much inventory too clear. But I always think that the winners and losers in the semiconductor industry are decided during recession.
Taiwan's domestic market is small but the export-oriented semiconductor industry actually depend heavily on the domestic environment. As TSMC CEO CC Wei has noted, the number of semiconductors in automobiles is increasing at a rate of 15% per year. What it really means is that there are huge opportunities and the key is whether you are competitive enough to gain portions of them.
The global supply chain is entering uncharted waters where geopolitical power struggle, climate change, and economic uncertainties are coalescing into a perfect storm, and old playbooks may no longer work. At the DIGITIMES Asia-hosted Supply Chain Summit hybrid event that opened on September 27 in Taipei, experts including Hinrich Foundation research fellow Alex Capri, Wall Street Journal chief economic commentator Greg Ip, and Tata Motors Purchase and Supply Chain vice president Hemant Barge advised companies to watch out for the new megatrends and adopt new strategies to thrive in the challenging time.