China needs Taiwan’s biggest chipmaker — more than the other way around

Taiwan is home to more than 90% of the manufacturing capacity for the world’s most advanced semiconductors, according to a 2021 Boston Consulting Group report. Pictured here is a TSMC building in Taiwan on April 8, 2022.

He said that the real challenges for the companies are from the end demand.

Demand for products that use their chips has fallen recently.

Despite warnings from Beijing, Pelosi went to Taiwan despite the fact that Beijing considers the island part of its territory. Beijing is recognized as the sole legal government of China by the U.S.

Concerns about the risk to global access to critical chips have been raised by Beijing's increased military exercises around the island of Taiwan.

Taiwan-made chips are too important to the world and to China for any disruption on the chip front.

Secular demand drivers, cloud infrastructure, electric vehicles, next generation of industrial facilities, they all require chips that are made at TSMC.

The global economy would slow down more than Covid did if TSMC could not operate.

Taiwan Semiconductor Manufacturing Co., or TSMC, was described as being in a league of its own by a CLSA analyst.

He said that it was not a real threat to be expected anytime soon.

Beijing has increased its chip-building efforts in the last few years due to supportive policies. The debt pileup of Tsinghua Unigroup shows how the system has been prone to waste despite recent growth and tech development at another Chinese chip giant.

It took SMIC 15 years to get to where TSMC is today.

He said that China doesn't have access to the best equipment. It would take a while to get the engineering knowhow.

The U.S. banned Chinese companies from using American technology under the Trump administration.

TSMC was no longer able to make chips forHuawei.

David Hsu, associate director at S&P Global Ratings, said that TSMC's China revenue had grown to 20% of the company's total revenue.

Taiwan Semiconductor Manufacturing Co.'s exposure to China dropped back to 10% of the company's revenue in 2021. The capacity of TSMC was shifted after the ban on the Chinese company.

TSMC's business is still doing well. The company, which is a major Apple supplier, reported second quarter revenue of about $18 billion, up by more than 40% from a year ago.

SMIC's revenue for the same quarter of $1.9 billion was up by more than 40% from a year ago.

The U.S. is trying to improve its access to technology. The Chips and Science Act offers subsidies to chipmakers for manufacturing in the U.S.

Bernstein analysts expect alukewarm impact for TSMC.

In order to reduce risk and increase scale, TSMC will try to stay neutral in the competition of the US and China. Even with the incentive of the CHIPS Act now, we think TSMC will keep its overseas capacity expansion in check.

Bernstein estimates that about 10% of TSMC's capacity is in mainland China, compared to less than 2% in the U.S.

The factory is being built in Arizona. The company operates in two mainland Chinese cities.

CLSA's Chen said the Arizona facility will focus on more advanced technology, while Taiwan's restrictions on chipmakers' investment into China means manufacturing there will remain focused on older, legacy technology.

The report was contributed to by CNBC employees.