Taiwan Semiconductor Manufacturing Company Limited (TSMC) is a multinational semiconductor design and manufacturing company based in Taiwan. As of February 2023, it is the world's most valuable semiconductor company and has also surpassed Tencent to become Asia’s most valuable country, with a market capitalization of $476.30 billion. While foreign investors hold a majority of TSMC's shares, the company's headquarters and primary operations are located in the Hsinchu Science Park in Hsinchu.
As of the end of 2019, TSMC has 28 billion shares, of which 92.8% of the shares have been listed and traded, its majority of the shares are held by foreign investors with the largest shareholder being the US Citigroup with a share of 20.5% followed by Taiwan Executive Yuan Development Fund, with a share of 6.3%.
In May 2020, TSMC announced plans to construct a $12 billion advanced semiconductor fabrication plant in the United States. The plant will enjoy tax privileges and other incentives with the support of the US federal government and the state of Arizona. Although TSMC already has a fab in Camas, Washington, and design centers in Austin, Texas, and San Jose, California, the new plant will focus on producing the latest 5-nanometer chips in semiconductor technology. This is a strategic political and business decision between the United States and TSMC to shift the technology supply chain away from Asia, where it is primarily centered.
The Covid-19 pandemic has revealed the United States' dependence on Chinese manufacturers, as lockdowns led to a global shortage of high-tech chips. Once the Arizona plant opens, it will produce enough chips to meet the US annual demand. As of the latest reports, TSMC plans to invest $40 billion (more than triple the initial planned investment) in the Arizona chip plant, creating 13,000 high-tech jobs, including 4,500 at TSMC and the remainder at its suppliers, making it the largest foreign investment in US history.
However, the biggest threat on the horizon is China's desire to nationalize Taiwan and bring it back under its control. The Taiwan government is on high alert over the potential for China to annex Taiwan and make it part of China again. If China's plans come to fruition, it would have unquestionable control over the supply chain, posing a significant threat to western economies. This may be a driving factor behind TSMC's heavy capital investments in the United States to protect itself and benefit the States vis-a-vis. The company has also planned to build semiconductor fabrication plants Japan and EU.
Samsung is also planning to build a semiconductor fabrication plant in Austin, Texas, and the EU is considering setting up similar plants for similar reasons. They also see the potential threat of a countries nationalizing the industry to its advantage and crippling other economies. The move will help eliminate the shortage created by the pandemic and also bolster the level playing field in the semiconductor industry. As per the CEO, quote” In Japan, we are building a specialty technology fab [semiconductor fabrication plant, or factory], which will utilize 12- and 16-nanometer and 22-, 28-process technologies. Volume production is scheduled for late 2024.” However, The TSMC is said to be in partnership with Sony Semiconductor Solutions Corporations on its new $7 Billion chip factory.
In conclusion, TSMC's investment in the United States and other countries represents a significant shift in the technology supply chain. This move will strengthen the US national security and reduce dependence on China. It will also help both parties as the demand for processors is growing exponentially and will continue to rise in the future. With the current geopolitical climate, the move will help ensure the semiconductor industry remains stable, and no one country can hold the supply chain to its advantage.
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