Taiwan senses opportunity to bolster relations with west after chip shortages

Taiwan’s top trade official has called the global shortage of auto chips an opportunity for Taipei to build closer relations with western nations.

“Everyone sees this situation and thinks that they cannot ignore Taiwan any longer,” John Deng, Taiwan’s trade representative, told the Financial Times. “This is definitely beneficial to Taiwan’s trade agenda.”

The remarks follow weeks of lobbying by various governments with Taiwan, a hub for global semiconductor production, for more capacity to be allocated to automobile chips.

In January, Peter Altmaier, the German economy minister asked his Taiwanese counterpart Wang Mei-hua to help ensure that Taiwan Semiconductor Manufacturing Company, the world’s largest contract chipmaker, would prioritise chips for use in cars. Tokyo and Washington have also been in touch with both the Taiwanese government and TSMC directly over the shortage.

Following an online meeting with US government officials and company executives about supply chain co-operation on Friday, Wang said the Americans had thanked Taiwan for its help on the auto chip issue.

The intense government involvement has triggered political controversy in Taiwan. One local newspaper criticised in an editorial on Thursday what it called Wang’s intervention in private business activity.

The backlash has been intense particularly because Germany has traditionally avoided any acknowledgment of Taiwan’s existence or close ties for fear of offending China. Beijing claims Taiwan as its territory and demands other countries deny recognition of its de facto independence.

After Taiwan donated millions of medical face masks to European countries last year, German Chancellor Angela Merkel’s spokesman would not even utter the word “Taiwan” when asked by journalists for an acknowledgment.

“In the past, maybe some countries thought that if they get too close with Taiwan, it is trouble, and that China will punish them,” said Deng.

The auto chip shortage had highlighted Taiwan’s importance and the crucial role it played in the semiconductor industry, he added. “This issue has shown to the whole world that Taiwan is reliable and Taiwan’s companies can be trusted.”

In the US, the car chip shortage stoked discussions about the perceived need to bring back more semiconductor manufacturing capacity, which relocated to Asia many years ago.

General Motors will this week shut three US plants and cut production in a South Korean factory owing to the shortage. Ford is cutting production this week at two plants and said last week that the chip shortage could slash profits this year by $2.5bn.

Deng played down the prospects for any quick resolution of the shortage. “This will not happen,” he said, commenting on suggestions that construction of more chip manufacturing capacity in the US should be accelerated to help ease the squeeze.

He said recent discussions between governments were not having a direct impact on capacity allocation.

While TSMC accounts for more than half of the global foundry market, auto chips account for only 3 per cent to 4 per cent of its revenue. Moreover, carmakers do not buy chips directly from them but from auto suppliers. Those, in turn, source them from dedicated chip design companies, which outsource manufacturing to TSMC.

“It is natural for each country’s government to support their industry,” Deng said. “But it is a commercial decision. After all, business is business.”