[Peace&Chips] Taiwan Embracing Foundry Leader TSMC... A Semiconductor Doppelganger

Taiwan, Sharing Many Similarities with Han... High Semiconductor Dependence
TSMC's Growth Slows Amid Worst Cold Wave in History
Detailed Q1 Earnings to Be Announced on the 20th

Editor's NoteSemiconductors, known as the rice of modern industry. Although it's a term we hear every day, it's often hard to explain. Peace & Chips will make the complex concepts and overall industry trends easy to digest for you. Just bring your spoon.

I visited Taiwan for the first time this month. Fortunately (?), it was a personal trip, not a business trip. Taiwan has a relatively short flight time of two hours and many semiconductor companies, so there was a strong sense of familiarity, but actually visiting, I was quite surprised by the many strongly flavored foods. It made me feel moment by moment that I was in a foreign country.

However, after staying for 2 nights and 3 days, I gradually noticed similarities with our country. Taipei, the capital of Taiwan, has a large river running through the city center, and seeing citizens spending leisure time in the surrounding parks reminded me of the Han River. Most of the land area being surrounded by mountains was also a common feature.

View near 'Taipei 101,' a landmark building in downtown Taipei, Taiwan /
Photo by Kim Pyeonghwa

Additionally, historical similarities were significant, such as the civil war caused by ideological conflicts during the Cold War affecting nation formation, and the past Japanese colonial rule. With a high population density and an export-oriented national economy, the more I looked, the more I thought Taiwan is a country with many commonalities.

It is also an undeniable common denominator that semiconductors are developed as a core national industry and security asset. As everyone knows, Taiwan is home to TSMC, the number one foundry (semiconductor contract manufacturing) company. TSMC recently has a market share close to 60%, demonstrating overwhelming market dominance. In addition, it boasts strong players in the system semiconductor industry such as fabless (semiconductor design) company MediaTek and design house company Global Unichip (GUC).

Unlike memory semiconductors, which domestic companies focus on, system semiconductors are less affected by economic cycles, but due to the current worst-ever downturn, Taiwan is also not escaping the cold wave. The semiconductor export volume has sharply declined, and Taiwan is facing difficulties similar to those of our country.

Taiwan's export volume has continued to decrease this year. From January to February, exports dropped 19.2% compared to the same period last year, a larger decline than South Korea's (-12.0%). Last month, exports also fell by 19.1%. The Korea International Trade Association pointed out that this phenomenon occurs because Taiwan's dependence on semiconductors is greater than South Korea's.

Partial exterior view of TSMC Fab 2 factory in Taiwan /
[Photo by TSMC]

Given this situation, even TSMC's performance, which seemed only to rise, is faltering. TSMC boasted record-high earnings last year, surpassing Samsung Electronics to rank first in global semiconductor industry sales in the 3rd and 4th quarters, but received a disappointing report card for this first quarter.

TSMC announced on the 10th that its first-quarter sales increased by 3.6% year-on-year to 508.633 billion New Taiwan dollars. Although not negative, this is a clear slowdown compared to last year's first-quarter sales growth rate of 35.5% and annual growth rate of 42.6%. TSMC will announce detailed first-quarter results on the 20th (Taiwan time).

This article is from [Peace & Chips], published weekly by Asia Economy. Click subscribe to receive articles for free.

☞Subscribe