Surge in COVID-19 infections in Taiwan has the potential to disrupt global chip supply

With just 1% of its population vaccinated to COVID-19, a surge in coronavirus infections in Taiwan has the potential to disrupt the chip industry and global supply. There is also political pressure. Taiwan plans to purchase five million doses directly from Germany’s BioNTech SE, rather than via a Chinese company which held the rights to develop and market the BioNTech-Pfizer Inc vaccine across China, Hong Kong, Macau and Taiwan.

However, now the lack of vaccines and a surge in COVID-19 cases threatens to trigger a lockdown that would definitely have an impact on the global chip industry and supply. The onset late last year of chip shortages that have hobbled industries from autos to computer gaming had looked to give Taipei global leverage. TSMC is the world’s leading provider of cutting-edge semiconductors and holds 56% of the so-called foundry business of manufacturing chips designed by customers including Apple Inc. and Qualcomm Inc.

Experts say by rejecting China’s vaccines and warning of more chip shortages if it can’t source enough doses elsewhere, Taiwan is giving even greater incentive to the world’s biggest economies to make investments that may erode its Taipei’s competitive edge in semiconductors over the long term. Moreover, its recent geopolitical clout, dominance of the market for cutting-edge chips, is under threat as governments from the United States to Europe and Japan seek to spur production at home.

Pat Gelsinger, CEO of Silicon Valley’s Intel Corp, in an interview said the world has become too dependent on Taiwan and Korea. “The US and Europe should act more aggressively to counter the imbalance of Asia’s lead in manufacturing semiconductors that are mostly consumed in the West. The US has already jumped to the opportunity, with the Biden administration working with Taipei and TSMC to address the chip shortage, while also looking to reduce US’s dependence on Taiwan. The government is also working to draft a new export control list targeting technologies with military use, to tighten curbs on exports to China and raise the penalty for violations.

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China is also following the global chip shortage closely, with Chinese companies ramping up efforts to recruit Taiwanese engineers. But Taiwan is very much aware of this and its Ministry of Labour has instructed local job-search websites to remove ads recruiting Taiwanese citizens to work for China, particularly in the semiconductor industry.