Less than forty minutes by high-speed train from Taipei, heading south on the island of Formosa, you reach Hsinchu, the industrial engine of Taiwan. Although it is one hundred kilometers from the capital, getting going feels like crossing a large megalopolis, not surprisingly Taiwan is among the first nations in the world for population density (650 inhabitants per square kilometer against 196 in Italy).
Here lies a technological hub among the most advanced in the world in continuous expansion that hosts the main companies producing the true wealth of Taiwan: microchips. It is no coincidence that Hsinchu is nicknamed the Silicon Valley of Taiwan due to the high number of technological companies located in the city.
Within a radius of just over a kilometer there are dozens of companies that are often unknown in Europe and the West to non-experts but with exorbitant turnovers and are of enormous importance to the lives of all of us. It is likely that the chips contained in the cell phone you are holding in your hands, in the car you drive, in your television, even in the coffee machine were made here. Anyone who has bought a new car in the last two or three years and encountered delays in deliveries has been told that they are due to the difficulty in sourcing the chips that are essential in the automotive sector. The fact that the semiconductor industry is growing and continually expanding is demonstrated by the new factories and buildings under construction on the outskirts of Hsinchu. To understand the size of the sector in Taiwan, just think that 20% of all chips destined for a global market are produced here. Today, in fact, no nation can think of having complete control of the production chain; being able to guarantee the supply chain is almost impossible.
The two leading companies in the sector are UMC (United Microelectronics Corporation) and TSMC (Taiwan Semiconductor Manufacturing Company) and it is in one of the TSMC offices in Hsinchu (there are numerous buildings that house the company’s offices and factories) that we meet one of those responsible for external relations.
Taiwan Semiconductor Manufacturing Company was founded in 1987 by Morris Chang who is something of a national hero in Taiwan. Born in mainland China in 1931, after spending his early elementary school years in British Hong Kong, he moved to the United States in 1949 to study at Harvard. After graduating from MIT in Boston with a bachelor’s and master’s degrees in mechanical engineering, he began working in the semiconductor industry in the United States until he was recruited by the Taiwanese government to become president of the Taiwan Institute of Industrial Technology Research.
The turning point came in 1987 when he founded Tsmc with a successful history of public/private partnership that should be an example to be adopted in Italy. Having understood that microchips represent a strategic sector with great prospects, the Taiwanese government invested in the creation of the company, remaining however under 50% of the capital and, after starting the business, it decreased in capital to have a share of less than 10%. Until the mid-eighties, despite having a developed manufacturing also in electronics, Taiwan did not have an industrial sector in which it excelled, hence the intuition to focus on chips.
Today, Tsmc is a giant with 76,000 employees and a constantly increasing turnover ($7.9 billion in July alone) driven in particular by the growth in sales of chips for artificial intelligence. The main characteristic of this company (as well as others operating in the sector) is the strong focus on research to which they dedicate significant resources, making them constantly at the forefront.
In addition to the traditional production of microchips, over the past decade, the Taiwanese industry has invested heavily in the production of so-called “AI chips”, perhaps the most important components in the evolution of artificial intelligence. Speaking to a TMSC manager in Hsinchu, he explains that “a computer chip is like 8 mathematicians with a PhD trying to solve a problem at the same time, an artificial intelligence chip is like 200 students doing calculations at the same time”. The market for artificial intelligence chips is experiencing a real boom and is expected to double in 2027, reaching a turnover of 257.6 billion dollars by 2033. It is inevitable that the race to produce AI chips has begun, primarily by China and the United States, but Taiwan has a competitive advantage due to its history.
The intuition of the Taiwanese semiconductor industry was to deal only with manufacturing, leaving the assembly of the products to its customers: «A large company that needs microchips, instead of having to sustain an investment of about 20 billion dollars to build a production site, can order them directly from TSMC and then use them for its own products».
In recent years, Tsmc has opened new factories in other countries, in the United States in Arizona, in Japan and the first opening in Europe is planned in Germany. The official reason is that the opening of new offices is to meet customer needs but there is also a geopolitical issue. The semiconductor industry is a prime target for China and diversifying production sites outside Taiwan is an insurance against possible future critical scenarios. Many in Taiwan prefer not to address the topic of China and yet, a high-level diplomatic source tells us, «the leading nation for exports from Taiwan is China with 40%.
This means that if China were to wage economic war against Taiwan, it would bring the island’s economy to its knees.”
But it is also thanks to the presence of the semiconductor industry that the interest of the United States and the West in Taiwan remaining sovereign and independent from China is realized.