Why does China want Taiwan?

because china want taiwan

If you are reading this editorial on your smartphone, it is very likely that this was produced in China. The sales figures say so: today, in Italy, half of the phones come from Chinese companies. If you are reading me from the notebook, again the data tells us that the leading company is Chinese. I could say the same for the video accompanying this article: what if you were watching it from your smart TV? Yes, even the leading company in the production of LCD screens it's Chinese. And I can say the same thing for Nintendo, PlayStation and Xbox: all the consoles in your living rooms are assembled in China. Despite this, there is an industry where China is trying to become top of the class but failing. And if lately we hear about war between China and Taiwan it is also for this reason, so today I want to tell you about China's plan to become a leader in semiconductors.

To define the dispute between the two sides as "complex" would be an understatement. On the other hand we are talking about a large island poco more than Sardinia but which has 24 million inhabitants, self-proclaimed Republic of China but recognized as such by only 15 nations in the world. We could talk far and wide on the subject, but today's lesson is neither a history nor a geography lesson, but an explanation of how chip crisis is reigniting this war, but also about how China's tech market would not exist without Taiwan.

China vs Taiwan: it's all about the chips

Today more than ever, being a leader in semiconductors means influencing the global economic balance. As I have explained to you in this article, if you look at the top 5 of the world chipmakers we find Taiwan, South Corea, USA and only at the bottom the China. But how is this possible, if the latter is so important to the world of technology?

For a nation to aspire to become a leader in semiconductors, it needs to take a specific direction. For example, South Korea with Samsung is a leader in memory production. The United States has Intel in the manufacturing of computer chips. Japan has Sony, which leads the way in the production of photographic sensors. And then there is Taiwan, which found the goose that lays the golden egg in TSMC and its System-on-a-Chip, the brain of every smartphone and tablet in the world.

top 5 chipmakers 2021

So let's go in order and divide this vast world into 2 macro-categories, the most critical ones: chips for smartphones and those for computers.

The smartphone chip industry in China

Starting from smartphones, it is a sector that is divided between fabless and fab companies, a difference that I have explained to you in this dedicated article. Between the two, theindustry fab is undoubtedly the most important: no matter how good you may be at designing chips, if you can't print them you won't get very far. In both cases, however, we are talking about one of the most expensive and complex markets in the world and which therefore requires extremely advanced labor. As the study reports "China IC Industry Talent Development Report", In 2020 China has 541 thousand employees in the chip industry, but to remain competitive it will need another 200 thousand by 2023. It is clear that there is a shortage of talent, and this is where we begin to understand how dependent China is on Taiwan.

SMIC history

First of all, the founder of SMIC, the leading fab company in China, is called Richard Chang and is of Taiwanese descent. He worked for 20 years in Texas Instruments alongside Morris Chang, another Taiwanese historian as founder of none other than TSMC. Once he moved to China, Richard's creation of SMIC started in 2000 from Zhangjiang Hi-Tech Park, one of the various Chinese Silicon Valleys created between the 80s and 90s to follow the Californian success but also the Taiwanese one, which in the own Silicon Valley, that is the Hsinchu Science Park, saw the birth of realities such as TSMC, UMC and MediaTek.

Even SMIC's first historical rival, China's Grace Semiconductor, had strong ties to Taiwan. In addition to Jiang Zemin, son of the then secretary of the Chinese Communist Party, one of Grace's founders was Taiwanese Winston Wang. Brother of Cher Wang, founder of HTC and the chipmaker VIA Technologies, brother of Charlene Wang, founder of another chipmaker, First International Computer, but above all son of Wang Yung-ching, one of the richest people in the world as creator of Formosa Plastics, the company on which the history of the Taiwanese economy is based.

China has always known that it depends on Taiwan: even Foxconn, another Chinese jewel whose factories make up 40% of the world's electronics, operates a lot in China but was founded by Taiwanese Terry Gou.

smic

Going back to talking about SMIC, it is only thanks to Taiwan that today it is so important for China, which invested over 10 billion in the first plants in Shanghai, Chengdu and Wuhan. But highly qualified personnel were needed to start them: and where to find them, if not in Taiwan? Too bad that a simple Taiwanese employee at the time had a better salary than a Chinese manager. To steal her talents, SMIC implemented the following strategy: 1) the money, offering thousands of shares to important TSMC members for values ​​that today would amount to millions of dollars. Point 2) ambition: a new adventure in SMIC could have meant making a career in an ambitious and rapidly growing company. And then, point 3) patriotism: for the many Chinese emigrants to work in TSMC, switching to SMIC would have meant contributing to China's progress. SMIC grew quickly in a few years, but TSMC she didn't stand by, not least because it seemed she wasn't just stealing her employees. In 2003 he took the complaint for theft of intellectual property, complaint that TSMC won and which marked the beginning of the crisis for SMIC, starting with the resignation of the founder.

The reasons for the crisis were many: being China more backward than Taiwan, SMIC began as a manufacturer of memories, easier to make than TSMC's chips but less profitable. Furthermore, as China invested mountains of money, small competitors were born that fragmented the market, as in 2022 Ningbo Zhongwei, also founded by a former TSMC manager and then sold to BYD, a large car manufacturer and smartphone assembler for companies such as Xiaomi, OPPO. , Huawei, Honor, Nokia and Motorola.

China's dependence on Taiwan can also be found in the way SMIC reorganized itself after the resignation of the founder. On the upper floors of the company there were several former leader of TSMC, such as Tzu-yin Chiu, Chiang Shangyi but above all Liang Mong Song, called “the mercenary of the chips”, as he was convicted by TSMC for the theft of industrial secrets in favor of Samsung and South Korea, which he then betrayed by going to China. Liang's was a fundamental assumption for SMIC: with her experience, in 2 years he made her make a generational leap of 10 years, making her move from 28 nm chips to 7 nm ones. Thanks to the progress achieved, SMIC also worked with Qualcomm. You remember Redmi Note Prime and Moto G 2015? Both were equipped with the Snapdragon 410, a low-end chip but with the same 28 nm as the then more powerful Snapdragon 800 and 805: thanks to the SMIC factories. In addition, SMIC bought foreign companies, such as 70% detection of the German-Italian chipmaker LFoundry, thus opening the doors to the car chip market, complete with a factory in Avezzano in Abruzzo.

smic

Today SMIC is the most important fab company in China: this is demonstrated by the new factories in Shanghai, Beijing and Shenzhen, for a total of 20 billion in investments. Impressive numbers, except that TSMC has announced a plan worth over 100 billion for its expansion. And here we go back to the starting point: how can small Taiwan do better than the mega-power China? If TSMC has revolutionized the semiconductor market it is because, as its founder teaches, to be the best you need to be open to the world and its markets, a philosophy that does not go well with modern Chinese culture. As researcher Yang Ruilin states, if working in TSMC means acting purely in terms of business, working in SMIC also means acting on the basis of political and ideological reasons, also because every decision of Chinese companies must first pass the scrutiny of the government.

If China is backward it is also because of its geopolitical balance, to the advantage of a Taiwan historically closer to the West. Since the US banned SMIC, they have cut it off from buying the very expensive machines that allow TSMC and Samsung to produce the much-valued 5nm chips from the Dutch ASML. At this rate, SMIC may never be on par with them, but that's not necessarily a bad thing. While TSMC and Samsung are competing for the high-end, SMIC continues to focus on non-advanced but nonetheless profitable sectors, such as automotive, connectivity and the Internet of Things.

UNISOC history

Ok, I told you about smartphones and the fab industry, but how is China placed in thefabless industry? Needless to say, even here to command are the USA and Taiwan, respectively with Qualcomm and MediaTek. We could say that there are 2 ways to become a leader: make friends with the companies of the most advanced nations, as Taiwan did, or spend a lot of money and buy them, as China tries to do. The only flagship fabless chipmaker in China is UNISOC, i.e. the merger of Spreadtrum e RDA Microelectronics, purchased for nearly 2 billion from Unigroup, a corporation founded by the prestigious Tsinghua university in Beijing, one of the best in the world and where, among other things, Xi Jinping graduated.

unisoc

You know the caterpillar of Slither.io? Here, given the lack of experience in the sector, the only way to make UNISOC a leader was to make it incorporate increasingly large companies. After buying Spreadtrum and RDA Microelectronics, he spent another $ 2,3 billion to get himself H3C Technologies, HP's Chinese branch for servers and data networks. It goes without saying that these maneuvers made both the US and Taiwan suspicious. Not only did the US block UNISOC from becoming a shareholder of Western Digital, but above all the attempted acquisition, for the beauty of 23 billion Micron, the largest American memory company for brands such as Crucial, Ballistix and Lexar. Just think: if it had gone through, it would have been the largest acquisition in the history of an American company from a Chinese one. But even if at the time there was the Bush presidency, closer to China than Trump and Biden, the United States blocked everything so as not to put such an important company in the hands of China.

Same thing happened a few years later, when it was Taiwan that blocked UNISOC's attempt to seek a historic merger with MediaTek. A merger that would have made them the largest fabless chipmaker in the world, surpassing the American Qualcomm in one fell swoop. But in hindsight, MediaTek has nevertheless become the world's first fabless chipmaker by itself, noting Taiwan's superiority over China even in the fabless world. Of course, it is also true that in the last 12 months alone, more than 70 smartphones with UNISOC chips have sprung up. Let's face it, all low-grade smartphones: apart from names like Samsung, Honor, Realme, Motorola, Nokia and ZTE, the list contains all minor brands, such as UMIDIGI, Ulefone, Cubot, Blackview, Oukitel, Doogee and so on. We'll see if this tactic pays off in the long run, but the UNISOC annual growth of 95% it would seem to be paying off for the efforts.

market share 2021 chipmaker fabless

For the moment, we are talking about fab or fabless, the China's strategy in the smartphone chip market is to be the reference point for the low-cost market. But if he really wants to disconnect from the rest of the world, as feared on more and more occasions, there is still a long way to go. Also because so far I have talked to you about the smartphone world, but if we talk about computer chips the situation is even worse.

The PC chip industry in China

Zhaoxin

This is because, if the chips for smartphones have ARM architecture, therefore of British matrix, those for PCs have Intel x86 architecture therefore of American matrix. And you know, China doesn't like using American technologies, especially after the Snowden case, which in 2013 revealed how the United States spied on the whole world. To reduce dependence on American CPUs, it was born in 2013 Zhaoxin. And in your opinion, could China have been able to found a CPU company without Taiwan? Zhaoxin was born as a joint venture between China and the Taiwanese chipmaker VIA Technologies.

You should know that, normally, the US does not grant Intel licenses to Chinese companies to produce x86 CPUs for obvious reasons of competitiveness. But it happens that in the past VIA Technologies had absorbed the American Cyrix and Centaur, also absorbing their Intel x86 licenses which could thus be used in China years later. However, the results aren't exciting - the newest KX-6000 series is considered 8 years behind the American counterpart. Also because, due to China's desire to break away from Taiwan, Zhaoxin would like to have the CPUs produced by SMIC and no longer by TSMC. But we have seen how far SMIC lags behind the competition.

zhaoxin kx-6000

Hygon

China's other attempt in the world of CPUs is called Hygon, and guess what? It is a joint venture, but this time with the American AMD, which in 2015 was in crisis and saw in China an opportunity to recover. Of course, the partnership angered the United States, which tried to stop AMD from supplying x86 licenses to China. The result was a turnaround of companies and sub-companies to get AMD to help China make its own CPUs but without them getting their hands on licenses. But as for Zhaoxin, Hygon also failed to break through, also because the joint venture is then ended up in the Entity List.

In short, China and x86 is a marriage that does not have to be done. But is it really a problem? With its M1 chips, Apple has shown the world how ARM architecture can be highly competitive even in the PC world. And then, all smartphones have ARM architecture, and we are moving towards a future in which smartphones and PCs will increasingly be one. China has no say in x86 chips today, but if ARM lives up to expectations, we could talk about it again in the future.

hygon

Let's not forget South Korea and Japan

The fact remains that it will be very difficult, if not impossible, for China to replace its addiction to TSMC. And here we return to the threat looming over the island of Taiwan. There are those who say that Taiwan will end up like Hong Kong, that is, many protests in the rest of the world but with China left free to act. But in my opinion, the situation is very different for a whole series of geopolitical balances.

Primarily, the United States depends on Taiwan: without TSMC the very powerful Apple chips would not exist, to which, among other things, it has exclusively entrusted the entire initial 5 nm supply chain. And since its main customers are mostly Americans, namely Qualcomm, NVIDIA, AMD, Broadcom, and partially even Intel and Texas Instruments, TSMC is spending tens of billions building factories in America to shield its back from the Chinese advance. Imagine if TSMC fell into China's hands what a potential disaster it would be for America. Not to mention that, if Taiwan were taken by China, MediaTek would also become his and suddenly China would overtake the United States and the American Qualcomm in one fell swoop.

apple macbook pro 14 16 m1 pro max official italy specifications prices 2

If you look at the chessboard at stake, we have China on the one hand, the United States on the other together with Taiwan, but let's not forget South Korea and Japan as well. In the event that China really ends up conquering Taiwan, the United States knows they would need the South Corea. It proves it Qualcomm, which after years of exclusivity with TSMC is making more and more a Samsung. Among other things, the Korean Samsung and LG are also the main suppliers of screens in the world. The real problem is that Samsung is both a manufacturer and a rival of the companies it works with. Let's take Apple: the first iPhone 3G and 3GS had Samsung chips, but when Samsung started to be a rival in smartphones, from iPhone 4 onwards all the chips are made by TSMC.

Despite these ties, South Korea is between a rock and a hard place: in 2020, Samsung factories earned 46 billion from the US and 44 billion from China. Also, let's remember that the only companies Samsung has ever allowed to use its recent Exynos chips are Chinese, i.e. Meizu and vivo. In short, if the United States is okay with Taiwan's neutrality, the same cannot be said with South Korea, which is preparing a huge $ 450 billion plan to help it overcome TSMC.

samsung exynos 2200

In all this, the Japan is the most unfortunate. In the 80s, the United States boycotted NEC, Toshiba and Hitachi, as they were leaders in the production of memory against Intel. A move that brought the Japanese semiconductor industry to its knees, which has significantly shrunk over the years. All this in favor of Taiwan but above all South Korea, which today produces 59% of the memories in the world and on which the United States depends, given that the American Micron produces only 17%. Nonetheless, Japan remains an important American ally: give it by Sony factoriesIn fact, the photographic sensors of phones all over the world come out, including iPhones and even the smartphones of direct rival Samsung, also a manufacturer of photographic sensors.

A future between the intriguing and the disturbing is therefore envisaged, with the clash of the democratic markets of the USA, Taiwan, South Korea and Japan against the less democratic one of China.

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