Taiwanese Chipmaker May Have Outsize Influence on Global Economy

The dispute between the U.S. and China over Taiwan could impact the global economy, specifically because of trillions of dollars of activity tied to a Taiwanese chipmaker, according to Business Insider.

Taiwan Semiconductor Manufacturing Company (TSMC) is the world’s largest maker of advanced chips, which are used in a vast range of household products. No other company produces them at as high a volume as TSMC does. So, if the company were to cease production, manufacturing of items including cars, washing machines, and computers would plummet.

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"If China would invade Taiwan, that would be the biggest impact we've seen to the global economy — possibly ever," Glenn O'Donnell, the Vice President and Research Director at Forrester, told Business Insider. "This could be bigger than 1929."

TSMC doesn’t design the chips; it produces them for other companies at fabrication plants, in what’s called the foundry business. One of its biggest clients is Apple. TSMC is involved in more than half of the global semiconductor market and nearly 90% of the advanced processor market. It produces most of the world’s 1.4 billion smartphone processors and about 60% of those used by automakers, according to The Wall Street Journal.

In addition, TSMC makes chips for governments. Used in high-performance computing, they can guide missiles and speedily process loads of data.

The company has grown into an oligopoly, according to William Alan Reinsch, a Senior Advisor at the Center for Strategic and International Studies (CSIS), a national security think tank.

"When you have a very complex, very sophisticated, and very expensive technology where barriers to entry are very high — I mean, building a fab plant is in the billions — you can't just decide tomorrow, 'Well, I'm going to go into that business,'" he said. "It's not like making tea."

The semiconductor industry began in the U.S., which still handles most of the research and development. But chip manufacturing has been outsourced over the past 30 years, allowing a company like TSMC to become so massive.

"You build a big factory and you crank these things out by the thousands, and you do it in a low-wage, non-union country that probably doesn't have environmental requirements," Reinsch said. "You keep all the design and IP at home and you do all your sales, marketing, and service at home, and that's where you make the money."