China Conducts Missile Drills Near Taiwan

By: SiliconExpert on August 17th, 2022

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On Wednesday, August 3rd, China launched 11 missiles into waters surrounding Taiwan’s northeast and southwest coast just hours after US House Speaker, Nancy Pelosi, had concluded her visit to Taiwan. 

China has not shown a display of military power like this in over 25 years. China’s reprisal continued with an announcement suspending all imported goods from Taiwan, including citrus fruits and fish products. The export of goods to Taiwan, such as natural sand, an important component of semiconductor chip production, was also suspended. 

 

Conflict with Taiwan Would Cripple Global Electronics Production 

Disrupting the supply chain of semiconductors in Taiwan would have a rippling effect on the global economy and production of electronics goods. TSMC (Taiwan Semiconductor Manufacturing Company), Taiwan’s largest foundry, creates more than 50% of the world’s semiconductor chips, including 90% of the world’s highest performance chips. 

Only TSMC and Samsung are even capable of building a 5nm silicon chip, the smallest and most advanced chip in the world. The three largest mobile phone companies in the world, Samsung, Apple, and Huawei, all use 5nm chips in their current lineup of smartphones. Utilizing these advanced chips allows for 80% more transistors to be fitted inside of a mobile device, allowing higher levels of information processing: streaming video while texting, connecting to Wi-Fi and Bluetooth devices, while sending emails and receiving social media notifications. 

Losing access to Taiwan’s semiconductor fabrication would cause a crippling disruption to the high-end electronics technology market. Smartphone manufacturers would have to revert to older and larger technology, either resulting in low performance devices, or bulkier product designs to achieve the same level of performance. 

 

Get Proactive Updates Before Disaster Strikes 

To minimize the impact on their products, companies can look to source alternative parts or track the progress of investments into chip fabrication facilities. For instance, Samsung is also capable of fabricating a 5nm chip and could capture more of the global semiconductor market share. Or investments by Intel, TSMC, and Samsung into building new fabrication factories in the United States could alleviate chip demand in the near future. 

  • TSMC – $12 Billion Chip Facility in Arizona (announced June 2021) 
  • Samsung – $17 Billion Chip Facility in Texas (announced November 2021) 
  • Intel – $20 Billion Chip Facility in Ohio (announced January 2022) 

Getting end-to-end visibility on your supply chain allows companies to proactively mitigate risk before a catastrophic event happens. For example, before the Russian invasion of Ukraine, there was a buildup of Russian military forces near the Russia-Ukrainian border for 11 months. Ukraine, the supplier of 90% of the world’s pure semiconductor-grade neon gas, showed massive spikes in exports in the latter half of 2021, before showing steep declines in January 2022, two months before the invasion. 

With SiliconExpert’s BOM Manager, companies can access risk reports regarding inventory levels, pricing, and lead time. With proactive notifications sent directly to email inboxes, procurement and supply chain managers can be alerted to spikes in pricing or severe drops in inventory, allowing time to pivot in supply chain strategies. 

To learn how to use BOM Manager to plan for and mitigate supply chain risk, sign up for a 7-day free trial: 

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