Kaohsiung could become key hub

Provide chain networks within the Indo-Pacific are selectively reconfiguring and diversifying away from China as a consequence of black swan occasions such because the COVID-19 pandemic and the danger of weaponization of delicate applied sciences, provide chains and uncommon earth supplies.

Semiconductors have been of specific concern, as has Taiwan Semiconductor Manufacturing Co (TSMC). Given its dominant place producing 92 p.c of the world’s superior (10 nanometer or smaller) chips, and after the COVID-19 pandemic uncovered vulnerabilities and shortages within the chip provide chain, TSMC immediately discovered itself within the highlight amid a US-China know-how rivalry.

In its try to diversify from China, TSMC has regarded to Kaohsiung in southern Taiwan as a brand new manufacturing hub.

On Aug. 8, TSMC and the Kaohsiung Metropolis Authorities held a groundbreaking ceremony on the Nanzih Know-how Industrial Park, the place its new plant is to be constructed.

This was adopted final month by visits from President Tsai Ing-wen (蔡英文) and former US secretary of state Mike Pompeo to advertise Kaohsiung as a brand new hub for high-tech enterprise investments.

TSMC’s Kaohsiung fab is to provide 7 nanometer and 28 nanometer chips — the latter primarily for the automotive business and particularly necessary for German auto producers. The chip big is planning to spend US$100 billion over a number of years to increase its manufacturing capability inside Taiwan, in addition to within the US and Japan.

Nanzih Know-how Industrial Park is projected to turn into the core of Taiwan’s southern semiconductor “S hall,” a coverage precedence envisioned by Kaohsiung Mayor Chen Chi-mai’s (陳其邁) administration to type a know-how industrial cluster in Kaohsiung.

The undertaking would join the Tainan Science Park, Renwu Industrial Park, Ciaotou Science and Know-how Park and Nanzih Know-how Industrial Park in an S-shaped hall.

Moreover TSMC, different main know-how corporations resembling Germany-based Merck Group, Netherlands-based NXP and Win Semiconductors Corp have already been drawn to the world, and Nanzih Know-how Industrial Park is residence to Superior Semiconductor Engineering Inc — Taiwan’s second-largest semiconductor firm.

With well-established high-tech clusters in Hsinchu and Tainan, Kaohsiung may appear an odd selection for TSMC given its historic fame as a “rust belt metropolis” and an industrial zone.

Nevertheless, elements over the previous 12 months pushed Kaohsiung to the fore as TSMC’s place of selection for home growth.

As TSMC already has Fab 18 within the Tainan Science Park, it regarded to a close-by 300 hectare plot for the following section of its growth course of.

A CommonWealth Journal article mentioned that the Southern Taiwan Science Park had scheduled its land expropriation for growth to happen subsequent 12 months, however the Kaohsiung website supply got here in earlier.

Kaohsiung can be a conventional stronghold for Tsai’s Democratic Progressive Social gathering, in addition to for Chen.

Nevertheless, town’s water provide is perhaps the important thing purpose for TSMC’s choice. Final 12 months, Taiwan had its worst drought in 56 years, sending TSMC and different chipmakers scrambling for water wanted for the manufacturing processes, with tanker vans transporting water from Kaohsiung.

This incident highlighted the problem that water shortage locations on the semiconductor business as an entire, as TSMC and Intel fabs in Phoenix, Arizona, additionally face comparable land and water constraints.

With the entry of TSMC into the “S hall,” Kaohsiung and southern Taiwan are rising as a crucial node, not solely within the international semiconductor provide chain, but additionally as a key logistics hub in assist of Tsai’s New Southbound Coverage for additional commerce integration within the Indo-Pacific area.

Kaohsiung can be the most important port in Taiwan and ranks because the Fifteenth-largest on the planet, forward of Germany’s Hamburg at 17 and the US’ Lengthy Seashore at 22. Because the “S hall” and associated tertiary enterprise and repair sectors increase, Kaohsiung is poised to turn into a key heart for commerce and logistics within the Indo-Pacific.

Taiwanese protection analysts have proposed that the Port of Kaohsiung may turn into a cooperative safety location now that the US now not has entry to Hong Kong’s port.

This might work along with NATO’s exploration for cooperative safety and enhanced alternatives partnership roles for Asian nations resembling Japan and South Korea, and probably Singapore and Taiwan, as they’re world leaders in a number of rising and disruptive know-how sectors.

Regardless of not being an Asian NATO associate, Singapore has already been concerned with NATO Science and Know-how Group occasions. Likewise, as Taiwan is a de facto main non-NATO ally, it may probably interact in comparable cooperative safety exchanges — particularly within the discipline of maritime know-how.

Some US analysts wish to take a step additional, resembling Pompeo’s China advisor Miles Yu (余茂春), who proposed enlarging the NATO alliance to convey Indo-Pacific nations right into a broader North-Atlantic Indo-Pacific Treaty Group (NAIPTO) to confront a rising China.

Nevertheless, others specific doubts that this may come to fruition.

In an e-mail interview, NATO Protection Faculty Basis director Alessandro Politi wrote: “China, until it follows the trail of Russia relating to Taiwan, won’t be thought of a menace” by many NATO members, and absolutely not a precedence so long as the Ukraine battle is ongoing.

“NATO has a really exact geographic definition of its treaty and on this hinges Article 5, even in Kiev’s case,” he added.

As such, the extra reasonable situation to boost safety of the Transatlantic and Indo-Pacific provide chain won’t be an expanded NAIPTO navy alliance — which might denote decoupling from China — however as a substitute a focused “high-tech alliance,” as proposed by former NATO secretary-general Anders Fogh Rasmussen.

NATO can interact Asian companions in cooperative safety of rising and disruptive know-how sectors, whereas persevering with financial interdependence and selective diversification from China, given it stays a prime buying and selling associate for Taiwan, Japan, and different Asian and European nations.

Even Taiwan’s TSMC acquired an exemption from Washington’s new semiconductor export management laws, permitting it to proceed the growth of its Nanjing manufacturing facility in China.

As James Lewis, senior vice chairman and director of the strategic applied sciences program on the Heart for Strategic and Worldwide Research, mentioned, rising diversification and provide chain sovereignty “doesn’t imply the top of interdependence, however extra emphasis on indigenous manufacturing and regional provide chains.”

To that finish, the position of Kaohsiung is prone to proceed rising within the ongoing regionalization of the Indo-Pacific high-tech provide chain.

Christina Lin is a 2022 Taiwan fellow on the Ministry of International Affairs, and a visitor educational within the division of Asia-Pacific Industrial and Enterprise Administration at Nationwide College of Kaohsiung. She has intensive US authorities expertise engaged on Chinese language safety points, and is a contributing writer of the amount NATO and Asia-Pacific.