Taiwan is in a “precarious” position in the technology industry, Intel Chief Executive Pat Gelsigner said on Monday, as part of his company’s continued push for greater geographic diversity in electronics manufacturing.
“Taiwan plays such a critical role for tech supply chains, but it’s precarious,” Gelsinger said Monday at the WSJ Tech Live conference. “The world needs geographically balanced and resilient supply chains.”
His comments reflect new concerns about whether China will try to claim Taiwan as its own territory. China held naval military exercises near Taiwan when US House Speaker Nancy Pelosi visited the island nation earlier this year, and the Russian invasion of Ukraine has caused foreign policy pundits to reassess their assumptions about geopolitics.
Taiwan is home to Taiwan Semiconductor Manufacturing Co. (TSMC), the world leader in the semiconductor industry. It makes processors for tech giants like Apple, Nvidia, Qualcomm, AMD, Tesla, and even Intel. But Taiwan is home to many other big players, including PC makers Acer and Asus, TSMC’s chipmaking rival United Microelectronics, and Hon Hai Precision Industry Co., better known as Foxconn, which assembles iPhones at facilities Chinese.
Intel, of course, stands to benefit from any changes to chip manufacturing outside of Taiwan. It promised to build chips for other companies, not just for itself. To meet expected demand, Intel is building new chip manufacturing plants, called fabs, in Ohio, Arizona and Germany. That chip “smelting” effort is new for Intel, but it’s core business for TSMC and Intel’s other big rival, Samsung in South Korea.
However, Intel also trusts TSMC. The company builds graphics chips for Intel’s Arc line of graphics processors, elements of Intel’s Ponte Vecchio processors that are the brains of the US government’s Aurora supercomputer, and will build parts of next year’s PC processors. codenamed Meteor Lake.
Taiwan’s independence from China has come under increased scrutiny with Russia’s invasion of neighboring Ukraine, which helped undermine assumptions that the economic fallout would deter countries from going to war. China detailed its stance toward Taiwan in August, acknowledging the “protracted political confrontation” between China and Taiwan, but concluding: “China’s sovereignty and territory have never and will never be divided, and Taiwan’s status as part of the territory of China has never changed — and will never be allowed to change.”
Processors have become an essential component in everything from cars and toys to dishwashers and weapon systems. The chip shortage caused by the COVID pandemic revealed how dependent we have all become on processors and the ability of manufacturers and distributors to meet demand. The shortage was severe: automakers had to shut down production lines and ship vehicles without electronic components.
One result of the problem was the political will to boost chip manufacturing in the US through a five-year, $53 billion subsidy in the CHIPS and Science Act. Ultimately, Gelsinger expects the US to increase its share of chipmaking from around 12% today to 30% by the end of the decade, with Europe potentially increasing from less than 10% to 20%. Asia’s share would fall from around 80% to around 50%.
“These things are long term,” Gelsigner said. Today’s electronics supply chains took 30 years to build around the South China Sea, and President Joe Biden signing a massive government aid package is just a first step in reversing the trend, he said. But he believes that the process is already underway.
“Where the oil reserves are defined by the geopolitics of the last five decades,” Gelsinger said. “Where the factories are over the next five decades is more important.”