Editorial: Guarding Taiwan's egg-filled basket
10/01/1999
By Peter Dunn, WaferNews
Studs Terkel, outstanding American historian and radio interviewer, would sometimes end his broadcasts by exhorting listeners to "Put all your eggs in one basket ... and then guard that basket!"
In recent years, Taiwan has become an egg-filled basket for a substantial portion of the electronics industry, and it will be interesting to see how the world goes about guarding it against problems with its neighbor, China. I can't claim to be an expert on the political situation between the two, but in its simplest terms, China views Taiwan as a rogue province, while Taiwanese politicians are expressing varying degrees of interest in becoming an independent nation. For most of the last few decades, this situation has been simmering quietly, but every now and then it heats up, as it did in 1996 and again in recent weeks. The whole thing is complicated by the close US-Taiwan relationship, which includes American commitments to help defend the island (Washington sent an aircraft carrier to the region in 1996).
How important has Taiwan become to the chip industry? George Burns of Strategic Marketing Associates notes that about 80% of the world's pure-play foundry capacity is located there. "That's a small place to put a lot of capacity," notes Burns. Moreover, Taiwan is the current leader in investments, and also a major center of PC motherboard production, packaging, board stuffing, display production, and many other aspects of Planet Silicon. With inventories a thing of the past up and down the electronics supply chain, it wouldn't take much disruption, or even fear of disruption, to place global growth at risk.
Indeed, the CEO of a non-Taiwanese foundry told me that his company's sales pitch includes mention of the concentration of capacity in Taiwan, and suggests that it might make sense to have at least a second source in an area with less political tension. If I were a fabless company, or an IC manufacturer looking to outsource, I think I might pay attention to that.
I've been surprised that there haven't been more foundries in the US, given that labor costs aren't a big contributor to fab costs. Other than the WaferTech project, led by TSMC, there aren't many pure foundries here. There have been rumors that one of the big Taiwanese firms has been seeking a location in the US or Canada, and reports that the Fairchild fab in Maine might be bought by one of the Taiwanese foundry companies, but so far nothing concrete. Of course, IBM has a huge business making chips for others, but generally this goes on in fabs predominantly devoted to the company's own chip needs. A few years ago, there was an attempt by industry veteran Paul Castrucci to form Champlain Semiconductor Manufacturing Co. That promising project got scuttled when the latest downturn hit.
Over the last few decades, the semiconductor and electronic industries have been busy creating a trans-national world, one where technical smarts, responsiveness, and ever-dropping prices are the elements of power rather than the traditional armies and colonies. We build technopolises - areas like Silicon Valley, Singapore, the Taiwanese high-tech industrial parks, and the special industrial zones in China, designed to facilitate cross-border commerce and mutual reinforcement among corporations. As we lay out our international roadmaps, make intercontinental alliances, and fund international research cooperatives, we seem to be getting closer to the capitalist ideal of a world too busy making money to fight.
But we must remember that the old nontrans-national world is still out there, with its long-standing rivalries, grudges, and unsettled scores. It will pose a risk to the nice tidy technology world of Planet Silicon for many years to come, which means that we'll have to find ways to guard our precious baskets - and perhaps, despite Studs' advice, redistribute our eggs from time to time.
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Peter Dunn
WaferNews
[email protected]