Taiwan’s Ministry of Economic Affairs has asked domestic chip manufacturers to step in and help “like-minded” economies recover from the ongoing global shortage of semiconductors, which is currently crippling the automotive sector.
Breakdown of automotive chip market from 2014–2025. Image used courtesy of Grand View Research
Major automakers including Volkswagen, Ford, Nissan, Honda, and Fiat have all felt the global supply crunch, in some cases having to suspend operations and halt production in response. It wasn’t long before automakers and government ministers were asking Taiwan, which is home to some of the world’s most prominent chipmakers, to step in and persuade chipmakers to help ease the supply shortage.
TSMC Promises Best Effort
Following these requests from the likes of German diplomats in Taipei, the Japan-Taiwan Exchange Association, and the American Automotive Policy Council, Taiwanese officials asked Taiwanese chipmakers to give extra capacity to automotive customers.
Perhaps unsurprisingly, one of the first chipmakers to step up and offer its resources was Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker, which has recently reported $12.68 billion fourth-quarter revenues (up 22% year-over-year).
Overview of TSMC’s Q4 consolidated results. Image used courtesy of TSMC
Despite the ongoing COVID-19 pandemic, TSMC’s position as a contract chipmaker for the likes of Apple and AMD has allowed the company to excel and meet the rising demand for consumer and enterprise-grade silicon. TSMC has also boosted its manufacturing budget by $10 billion as Intel considers outsourcing the production of its entry- and mid-level processors and Samsung mulls its own multi-billion-dollar Texas foundry.
A Vaccine Quid Pro Quo
C. C. Chen, Taiwan’s vice minister of economic affairs, said that “They [TSMC] have agreed to do their best to help,” following a meeting that took place on January 27.
The meeting involved representatives from Germany, TSMC, and other semiconductor companies who discussed the shortage and how other nations could help Taiwan in return for increasing automotive chip supply.
The need for COVID-19 vaccines was naturally at the top of this list, and TSMC later confirmed that it would speed up automotive chip manufacturing in return for these vaccines.
According to sources from within the chip ecosystem, TSMC may use what is known as a “super hot” production run to quickly increase automotive chip supply. This is a risky practice not often employed by chipmakers because it can damage equipment, increase production costs, and reduce yields.
TSMC is the world’s largest contract chipmaker. Image used courtesy of Akira Kodaka and Nikkei Asia
Furthermore, the new automotive production run will inevitably mean that TSMC has to delay some of its existing chip orders. Given that automotive chips are rarely fabricated using leading-edge processes, it’s unlikely that this will affect consumer-grade chips such as those used by Apple.
The company has not released an official statement on how it plans to execute an increase in automotive chip supply and does not comment on specifics about its customers.
Could the Shortage Soon Be Over?
Next, Taiwan’s Minister of Economic Affairs, Weng Mei-hua, is set to hold virtual meetings with the United States. These are expected to take place imminently and by the end of next week at the latest. The ministry acknowledged that it had been receiving requests since the end of last year from the U.S. and others through diplomatic channels.
“We’ve got requests from the U.S., Japan, and Europe—all like-minded countries to Taiwan. The issue is being handled at a higher level in the [Taiwanese] government,” a source told Nikkei Asia.
The U.S. State Department has said that Deputy Assistant Secretary for Trade Policy and Negotiations Matt Murray will participate in the meeting, marking the Biden administration’s first official exchange with Taiwan since it took office last month.
While it was reported on Friday that the meeting will also involve semiconductor firms, the Taiwanese economic ministry said that it will “not be limited to semiconductors,” potentially signaling the country’s intent to form new diplomatic relationships with the Biden administration amid threats toward Taiwan from China, and the ongoing U.S.-China “trade war.”