Did you know that 60% of the world’s semiconductors, and over 90% of the most advanced ones, are made in Taiwan? It’s highly likely that almost every device you have at home, from the simple lightbulbs to the mobile device or computer you’re using to read this, has semiconductors that were made in Taiwan. In fact, they might come from just one single company, the Taiwan Semiconductor Manufacturing Corporation, (TSMC).
Semiconductor manufacturing forms the groundwork for microchip production, which helps devices such as computers, smartphones, and consumer electronics function, as well as keep various industries operating, like automotive assembly lines, medical devices, and network infrastructures. So how come one of the most essential spare parts in the modern world could only come from one island?
The US was the original leader in advanced chipmaking, producing as much as 37% of the global supply in 1990. However, by 2020, the American chipmaking industry only produced 12% of the total global supply, with the rest coming from Taiwan, South Korea, and China.
Taiwan’s semiconductor industry can be traced back to the 1970s, as political and financial setbacks led the government to restructure its economy. To complete this, the government developed the Industrial Technology Research Institute, which has since been an important driver of Taiwan’s technology industry and economy. The ITRI’s initial project was a USD 10 million contract with Radio Corporation America (RCA), developing integrated circuits. In 1981, the project’s integrated circuit plant became United Microelectronics Corporation, which is Taiwan’s first semiconductor company.
However, there was another different company that reinvented the global chipmaking industry with a completely new chipmaking business model and put Taiwan on the map. The Taiwan Semiconductor Manufacturing Company was founded by Morris Chang in 1987 and began as a collaboration between the Taiwanese government, the Dutch tech giant Philips, and private investors interested in semiconductor technology.
In 1994, TSMC went public and partnered with computer chip giant AMD in creating the AM486 microprocessors. This led to strong business expansion and a sales growth of nearly 60%, leading to USD 1.45 billion in revenue a net income of USD 718 million by 1996, which is also the year that TSMC became the first Taiwanese company to get listed in the New York Stock Exchange. By the end of that year, TSMC was able to provide dividend payouts per employee as high as over six figures.
TSMC is now the world’s largest contract semiconductor manufacturer, leading over the second placer Samsung by a wide margin. Along with third placer United Microelectronics Corporation (UMC) and other Taiwanese companies, they make up 60% of global foundry revenue in 2020. The contribution of the semiconductor industry is so big that it makes up 15% of Taiwan’s GDP.
Because of this, Taiwan’s place in the modern world is somewhat irreplaceable, putting in place a so-called “silicon shield” that insulates it from disturbances in production. The reason why Taiwan was able to dominate the industry is because of its advanced knowledge, specialty, and technology dedicated to manufacturing. Making billions of semiconductors that can be as small as 10 nanometers requires complex software, a careful combination of explosive chemicals, ultra-pure silicon, and very expensive machines, and a handful of companies, like TSMC, have pioneered secret manufacturing methods with unprecedented accuracy and unparalleled scale. Therefore, with each year, around a third of the new computing power we use is virtually fabricated in Taiwan.
Want to learn more about what's popular with people in Asia? Then check out our other Eye on Asia entries! Check out our Asian survey about Taiwan's Tourism Comeback: How Culture and Incentives Are Winning Back Visitors. We also discussed Taiwan's dominance in the semiconductor industry in one of our Eye On Asia podcast episodes. We hope you could listen to that one too!