EDITORIAL: Tech expansion expands ‘shield’

Global expansion has evolved from an option into a dual-purpose strategic imperative for Taiwan’s semiconductor ecosystem amid demand for geographic diversification to hedge against geopolitical risks, as well as an insatiable appetite for artificial intelligence (AI) and high-performance computing devices.

Overseas expansion is expected to entrench Taiwan’s pivotal role in the global AI industry as long as the nation retains its lead in research, development and early deployment of cutting-edge manufacturing technologies.

The shift has been made evident by the global initiatives of industry leaders, including foundry companies Taiwan Semiconductor Manufacturing Co (TSMC) and Vanguard International Semiconductor Corp, alongside premier silicon wafer supplier GlobalWafers Co.

Vanguard, which specializes in mature manufacturing nodes, last week inaugurated a new US$6.7 billion 12-inch fab in Singapore alongside NXP Semiconductors NV to manufacture mixed-signal, power management and analog chips, as well as interposers. The facility is fully booked and Vanguard is conducting preliminary evaluations for a second fab.

GlobalWafers in July announced plans to expand capacity in Texas under a proposed collaboration with Micron Technology Inc involving a 10-year supply agreement and US$500 million in support.

TSMC’s capacity expansion in particular has garnered significant strategic interest, making its fab announcements a focal point of industry analyses. In July, TSMC announced it would double down on its US presence, boosting its total investment in Arizona to a staggering US$265 billion to support the rapid adoption of agentic AI applications. The additional investment is expected to fund advanced wafer fabrication and packaging facilities, bringing the planned total to 12 facilities.

Reports last week said that TSMC is looking beyond Arizona, with local media saying the foundry giant is considering Texas for a second site to house six next-generation fabrication plants with potential investment surpassing the amount earmarked for Arizona.

Although TSMC did not confirm the reports, a move to Texas would further diversify its US manufacturing footprint. During TSMC’s initial 2020 site evaluation for its landmark US expansion, Texas was bypassed in favor of Arizona, industrial sources said.

On Saturday, Tesla Inc chief executive officer Elon Musk wrote on X: “Just discussions, but something may come of it,” in response to a report of a potential chipmaking collaboration between TSMC and Terafab, his semiconductor initiative in Texas. Musk had chosen Intel Corp as the major partner to build the facility with an initial investment of US$16.8 billion.

TSMC’s aggressive overseas expansion — including in Arizona, Japan’s Kumamoto, Germany and potentially other global hubs — has two effects for Taiwan: It could help preserve Taiwan’s pivotal position, and transform its geopolitical and economic leverage.

With TSMC also accelerating investments into new, advanced chip fabs and packaging plants from Hsinchu to Kaohsiung, it is apparent that rather than a “hollowing out” of domestic industry — which had been a concern in 2020 — the changes represent a strategic diversification driven by demand and geopolitical realities as TSMC seeks to maintain its competitive edge over rivals Intel and Samsung Electronics Co. This year alone, TSMC is building 25 fabs and advanced packaging facilities worldwide, including 13 plants in Taiwan.

For Taiwan’s semiconductor supply chain, it represents a good growth opportunity to expand overseas. Factory construction companies and clean room installment service operators such as Marketech International Corp, L&K Engineering Co, United Integrated Services Co and Acter Group Co are benefiting from the expansion.

Da Yi Cheng Technology Co, which specializes in electrical hook-up and secondary power distribution engineering for semiconductor fabs, reported revenue growth of about 130 percent for last year to NT$2.66 billion (US$83.7 million). During the first half of this year, its revenue jumped to NT$2.51 billion. With paid-in capital of only NT$259 million, the revenue growth is staggering for a company of its scale.

Da Yi Cheng has installed electrical hook-up and secondary power distribution engineering for numerous TSMC fabs, including its first Arizona fab. The Tainan-based firm has expanded its global footprint to Japan, Singapore and Dresden, Germany, following the moves of TSMC and other customers.

One downside of the global trend is that Taiwan’s “silicon shield” might be eroded.

However, if the nation can elevate its single-point defense to a global ecosystem of shared interests, Taiwan might be able to mitigate geopolitical risks.