June 2023


When the chips are down

By Margaret Simons
Dr Miin Wu, chief executive of semiconductor company Macronix, outside the company headquarters

Dr Miin Wu, chief executive of semiconductor company Macronix. © Dave Tacon

Silicon semiconductor production could be the one thing keeping Taiwan safe from a mainland China takeover

Perhaps it is only near the end of a career that we can identify the individuals who have stood at the hinge of history. In the case of 75-year-old Dr Miin Wu, one of the founders of Taiwan’s silicon semiconductor chip industry, you could argue that he has been that hinge. Partly thanks to him, the world relies on Taiwan for more than 90 per cent of advanced semiconductors. And that means if we manage to avoid a world war involving China, he might be one of the reasons why.

Yet, as he stands in the showroom of Macronix, the company he founded 34 years ago in Hsinchu Science Park, near the north-western coast of Taiwan, Wu claims not to care about politics, the competition between superpowers or the escalating threat that China might attempt to achieve its long-held ambition to absorb Taiwan.

He doesn’t say so in as many words, but Wu clearly resents the restrictions introduced by the United States’ Biden administration that prevent him from selling some kinds of semiconductor chips to China. The Taiwanese government complies with US-imposed export controls aimed at hobbling China’s technological advances.

Macronix manufactures semiconductor chips used in drones, which have been adapted for use by both sides in the Russia–Ukraine war. Wu would sell the same products to China, but such trade is banned. His company used to supply chips to the Chinese phone company Huawei, until the restrictions ruled that out. Wu is permitted to sell China chips used in medical equipment and the automotive industry, so there is still plenty of money to be made. “There is no problem there,” Wu says. “Our chips save lives.”

But as for the threat that the world may go to war if China invades Taiwan, Wu tries not to pay attention to it. “I can’t do anything about it. I just try to concentrate on making the best technological advances. Then I hope the world will see the value of that, and let us live in peace.”

Wu is articulating a version of the theory – or perhaps it is merely a hope – behind much of Taiwanese, Chinese and American foreign policy. They call it the silicon shield: the idea that neither China nor the US can afford disruption to Taiwanese semiconductor manufacture. Therefore China cannot invade, and, if it did, the US could not abandon Taiwan to its fate.

Wu can’t show visitors around the factory floor where semiconductors are made due to the highly sensitive production process. Only essential personnel are allowed, clad in head-to-toe dust suits, and the doors have alarms to prevent incursions. The plant is built on shock absorbers to lessen vibrations, including from earthquakes, and it purifies its own water to wash the chips after each stage of assembly. It is “ultrapure”. No speck or impurity must be allowed.

Semiconductor chips are made from thin slices of silicon, layered and covered in components such as boron and phosphorus. Lithography is used to lay out complex patterns on the surface, creating transistors that control the flow of current. Tens of thousands of transistors are contained in an area not much larger than a fingernail.

Most of us own hundreds, perhaps thousands, of semiconductors. They are in our cars, phones, computers, televisions and kitchen appliances. They are essential to almost every aspect of modern life. Without them, we would be catapulted back into a comparative dark age of human development – a pre-computer age.

And yet, there are just two chip manufacturing powerhouses in the world. Taiwan produces about 66 per cent of the world’s supply, and more than 90 per cent of the most advanced chips, such as those used in smartphones. South Korea is responsible for another 17 per cent of world supply. A blockade of Taiwan by China, or a war in the Taiwan Strait, could see more than half of what makes contemporary life possible suddenly become unavailable.

The US and China are both racing to try and change this situation. The largest chip manufacturer in the world, Taiwan Semiconductor Manufacturing Company (TSMC), is expanding manufacture in Arizona, with the encouragement and support of the US government. As for China, its attempts to steal Taiwanese know-how and intellectual property are ongoing.

At this stage, however, semiconductor-chip production remains a predominantly Taiwanese venture, and so the fate of Taiwan will have a direct effect on the security and prosperity of the world. A recent briefing document from the Stockholm-based Institute for Security and Development Policy, considering the implications of the semiconductor industry for the European Community, concluded that China’s displays of force towards Taiwan could not be regarded as an internal domestic dispute. The situation is of direct concern to the peace and prosperity of Europe. And, the report noted, Taiwan was quite prepared to use the fact to bolster its national security. It also noted that the Taiwanese government had reservations about setting up “cutting edge” manufacture offshore. The report says that, since taking power in 2016, Taiwan’s president, Tsai Ing-wen, has pushed “for business interests to converge more with national interests”, and that “preserving and solidifying Taiwan’s position in the global semiconductor supply chain holds significant national security implications”.

Wu thinks it will take the US at least a decade to reach the same stage of expertise that exists in Taiwan. And his company has no intention of manufacturing anywhere but Taiwan.

Beginning life as one of history’s victims, Wu nearly died in 1949 when, as a newborn baby, his family took him on the perilous voyage from mainland China to Taiwan, as refugees from the communist takeover. His family was poor and life was a struggle. At university, he used to skip a class each Monday because if he got to the cafeteria early there was free bone broth, with a layer of clear oil on the surface. Despite hunger, he graduated and then made his way to Stanford University in the US, where he completed a master’s degree in science.

He then spent 14 years working in Silicon Valley for America’s leading technology companies, ending up in senior management at Intel. His home country was sometimes under brutal martial law imposed by the Chinese Nationalist Party – the Kuomintang – which had relocated to Taiwan in 1949. Its leaders were still claiming to be the true government of China.

By the 1970s, Taiwan was growing rich. It had become a world centre of cost-efficient manufacturing. Cheap household items and children’s toys bought in the West commonly bore the “Made in Taiwan” label. It was Miin Wu’s generation, aided by government incentives and incubators, that turned that low-cost manufacturing talent into one involving high technology.

In 1989, Wu returned to Taiwan, bringing with him about 40 of the most talented Taiwanese engineers then working in Silicon Valley, and founded Macronix. The San Jose Mercury News described their exit as a “reverse brain drain”.

Standing in the showroom used to promote his company’s achievements, Wu points to a 1998 copy of Forbes magazine with his portrait on the cover, back in the days when his hair was still black. The article, titled “Silicon island”, told how Wu and his colleagues and other entrepreneurs, supported by government, had helped establish Hsinchu Science Park – just 160 kilometres from mainland China – and there built an answer to California’s Silicon Valley. The atmosphere, Forbes reported, was like that of a gold rush.

Macronix is not the largest semiconductor manufacturer. Far from it. That is TSMC, which also has its headquarters at Hsinchu. But Wu’s company is one of the most innovative and advanced, with a reputation for research, development and innovation. It is the world leader in some kinds of highly advanced semiconductors used in space vehicles, medical and industrial devices, and games platforms.

If Wu can claim to have turned the tide of history, it is because of one manufacturing innovation. When he founded Macronix, his main competitors were in Japan. They were highly disciplined and experienced. In search of a competitive edge, he took the then innovative step of computerising all manufacturing processes. That meant Macronix began to accrue data on how slight changes in the complex geometry of semiconductors altered their performance.

“That is my innovation, my contribution to the world,” says Wu. “I was the one who brought the use of statistics to the manufacturing process. Working on such a small device, you must control the geometry very precisely – so many transistors on the wafer, each with its own structure. Using data and statistics, first slowly, then more quickly, we were able to optimise the devices.”

The innovative methods that began at Macronix are, today, a key reason Taiwan is so advanced in semiconductor manufacture. And that, in turn, is the main reason Taiwan has the attention of the world.

A conversation with Miin Wu and a visit to Macronix are regular stops on tours of Taiwan that the government organises for foreign media. I went on one recently. The 30 or so journalists also on the tour came from a wide array of countries, including the Netherlands, Germany, Indonesia, India, Nigeria and the Philippines. But on such tours there’s always heavy representation from nations – including Vatican City, Tuvalu, Haiti, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines – that continue to recognise Taiwan as “China”.

Also present was a young journalist from Ukraine, who sat glued to her phone as we were bussed from one briefing to another, trying to find out if her friends, family and colleagues had survived bombardments of her home city. She got special acknowledgement from all the government officials we met: Taiwan identifies with Ukraine, and wants the world to see the parallels.

We journalists got into the habit, among ourselves, of calling our trip the “please-like-us tour”. We met government officials, learnt about Taiwan’s success in tackling COVID and climate change, and its efforts to play a more active part in World Health Organization and United Nations forums – all efforts blocked by China.

The impression was of a country that is an enthusiastic democracy, in the way that perhaps only new democracies can be. Cynicism has not had time to set in. Perhaps it never will have that time.

Democratisation in Taiwan began with the lifting of martial law in 1987. Taiwan’s first direct presidential elections were held in 1996. In 2016, the Democratic Progressive Party’s Tsai Ing-wen won the presidential race, and the party won a majority of parliamentary seats. It was the first time the Kuomintang had lost its majority.

As we found on the please-like-us tour, Taiwan no longer talks about pretending to be the “real” government of China. Nor, pragmatically, does it expect countries such as Australia to advance it recognition, understanding mainland China’s dominant economic position. One diplomat confided to me that the press tours are largely aimed at increasing understanding and international sympathy, and so that Taiwan may be better understood and valued. I was told many Australians fail to distinguish Taiwan from Thailand – two nations that have almost nothing in common other than their initial letter.

As the generation that fled the mainland in 1949 ages and dies, there is a new Taiwanese identity among the young. In this, there is a parallel with post-Soviet Ukraine. Many Taiwanese a few years ago would have welcomed integration into China on the same basis as Hong Kong – one country, two systems. But the rise of a new generation and the suppression of human rights in Hong Kong have changed that. Opinion polls may still show that a large majority of Taiwanese wants to maintain the status quo in which Taiwan behaves as a sovereign state without provoking the Chinese by actually declaring independence. But there’s a growing minority that wants to move towards an independent Taiwan.

What’s more, a poll taken just after the invasion of Ukraine showed that 70 per cent of Taiwanese were willing to take up arms to repel a Chinese invasion. We met dozens of young people who give up weekends and pay to take courses in civil defence. Airsoft guns (low-power weapons used in recreational sports) have now become the centre of serious training in warfare. The Kuma Academy, one of Taiwan’s most prominent citizen-led civil defence organisations, runs lessons that focus heavily on cyberwarfare. Students are taught that Taiwan is already at war in a battle of disinformation. When the then speaker of the US House of Representatives, Nancy Pelosi, visited Taiwan in August 2022, digital signs at convenience stores were hacked by mainland China operatives to display messages criticising her trip. Earlier, disinformation circulated suggesting the government was lying about and underplaying the impact of COVID on Taiwan. Such cyberattacks have become regular, visible on the public transport system and, of course, on social media.

In August 2022, the Taiwanese government established the Ministry for Digital Affairs, which has created “meme engineering” teams in each government department to quickly respond to disinformation “packaged in such a way that you can’t help but want to share it”, in the words of Minister Audrey Tang. China, according to Tang, is attempting to incite fear and promote hopes of peace in the interests of building popular support for peaceful reunification with mainland China.

Tang, who is transgender, is presented by the government as part of the please-like-us schtick – offered as living evidence that Taiwan is a progressive, liberal state. Taiwan was, we were reminded, the first country in Asia to legalise same-sex marriage.

So far, China’s propaganda and disinformation are failing. And, as the prospect of a peaceful, voluntary reunification of Taiwan with mainland China fades, the threat of Chinese military action increases. Dr I-Chung Lai, president of The Prospect Foundation, a think tank that specialises in cross-strait relations, told us that the lesson of Ukraine is that dictators do not always behave rationally. Therefore, the fact that a war would be disastrous does not necessarily mean that President Xi will not begin one. Taiwanese authorities had assumed they would have years to prepare, he says. In the wake of the Ukraine invasion, that thinking is being modified.

We asked Taiwan’s minister for foreign affairs, Joseph Wu, whether he expected the US and Australia to support Taiwan in the event of a Chinese invasion. “Defending Taiwan is our own responsibility, and we are determined to defend ourselves,” he said. “We have no right to ask others to help us … if we are not prepared to defend ourselves.” What would an invasion look like? It would be fast and sudden, he said. Occupation might take as little as 14 hours. It would include a complete domination of sources of information, and perhaps the kidnapping of key government officials. In a best-case scenario the international community, if it responded at all, could not be expected to arrive for 24 hours. During that time, it would be up to the Taiwanese.

Minister Wu said the government was planning for a decentralised defence effort, including local governments, civil organisations and “grassroots level” groups to wage “asymmetric warfare”.

Taiwan is also under heavy pressure from the US to do more to prepare its own defence after years of underspending. In the early days of Taiwanese democracy, the military was regarded as an instrument of previous government oppression. During this time, what had been two years of compulsory national service for men was reduced to just four months, regarded by many as a virtual summer camp. But now that is changing. One year of compulsory military service is being reintroduced. Defence spending is increasing to at least 2.3 per cent of GDP, but I-Chung Lai says it is not only about money. Until recent years, the world was reluctant to sell military equipment to Taiwan for fear of annoying China.

And then there is the silicon shield.

In 2021, an extraordinary paper was published in the journal of the US Army War College. It became the journal’s most downloaded paper that year, and probably the most influential. Its suggestions are blunt but cannot be easily dismissed. The authors, Jared M. McKinney and Peter Harris, are leading defence and political academics.

The paper’s title, “Broken Nest: Deterring China from Invading Taiwan”, is taken from an old Chinese proverb, “Beneath a broken nest, how can there be any whole eggs?” First, McKinney and Harris say, the world should accept that if China wanted to invade Taiwan, it probably could. And, if there were a war between China and the US there is no guarantee that the US would win. Even if it did, it would then have to mount a permanent defence of Taiwan. If a conflict went nuclear, the results would be cataclysmic.

Given all this, the only hope is deterrence: to change China’s calculus by making it clear that the “nest would be broken” if there were an invasion. Specifically, the authors proposed that, in the event of an invasion, either the Taiwanese should destroy the semiconductor factories or the US should do it for them. To make the threat credible, an automatic mechanism could be put in place that would be triggered at the first sign of invasion.

Furthermore, the US and its allies should announce plans to give refugee status to highly skilled Taiwanese working in the sector. China would be denied access to Taiwan’s crucial intellectual property and the chips that power its manufacturing industry. The economic effect would be devastating enough to threaten the Chinese Communist Party’s hold on its own country.

“Paradoxically … it is only by making these threats credible that they will never have to be carried out … China must be made to believe there are no overall gains to be had from a military invasion of Taiwan, whereas there are considerable advantages to maintaining the status quo,” the paper says.

And what would make that status quo tolerable for the Chinese? The US would have to reduce its military footprint around Taiwan, and China would have to believe that forgoing an invasion was not tantamount to losing Taiwan.

McKinney and Harris’s paper has been widely criticised. Strategist Eric Chan pointed out that China does not want Taiwan mainly for its semiconductor industry, but for political and cultural reasons. Blowing up the industry would signal that the US considered Taiwan to be a lost cause – fit only for cannibalisation.

“Imagine the panic in Taipei as the US Air Force attempted to evacuate engineers,” Chan wrote. “This action would destroy the morale of the Taiwanese population and armed forces at the most critical point. Any Taiwan president who cooperated with such a plan would be run out of office (rightfully), and the CCP’s United Front propaganda apparatus would have a field day.”

Chan argued that the only response to the “existential challenge” of a Chinese move on Taiwan must be for the US to maintain or regain unquestioned military dominance. “A US demonstration of its ability to destroy the invasion fleet while systematically grinding the rest of the armed wing of the CCP … to dust … That is deterrence. What is not deterrence is telling our partners we are prepared to help them blow up the one industry that makes them economically relevant on the international stage.”

Other critics argued that China’s inevitable loss of trade with the US and Japan – about 5 per cent of the Chinese economy – would be much bigger disincentive to invasion than the destruction of the semiconductor industry.

And yet others argued that it was a mistake to assume Chinese leaders would behave rationally. Taiwan holds powerful symbolic value in China. Any leader who brought about unification would go down in Chinese history as a hero – and the Chinese Communist Party has already demonstrated willingness to harm the national interest in order to hold on to power.

McKinney and Harris replied to their critics by agreeing that the broken nest was a desperate strategy, but “we submit that Taiwan’s situation vis-a-vis China is increasingly desperate”. The alternative, the authors said, amounted to threatening China with World War Three over Taiwan. Such a conflict would turn Taiwan, and perhaps the rest of the world along with it, into a “hellscape”.

So what does Macronix’s Miin Wu think about all this? Does he, like many Taiwanese of his generation, hanker after a peaceful reunification with the mainland that he and his parents fled so many years ago? Or does he anticipate a future in which he and his key employees might be airlifted away from Hsinchu Science Park as his own government, or the US, bombarded the factories?

He wouldn’t be drawn – neither in his encounter with the international media group nor in a follow-up interview with me.

Wu is not a politician, he says. Merely a humble engineer. But he believes that if anyone destroyed the semiconductor industry it would be an economic catastrophe for the entire world – dwarfing the economic impact of the Russia–Ukraine war.

For the next century, Wu says, semiconductors will be key to global economic development. After that, “somebody will invent something new. There is no limit to human ingenuity.”

He won’t be there to see what comes next. But he expects to live out the rest of his days in a nation at peace. Surely, he says, Taiwan’s technological achievements, which have been his life’s work, mean it will be left alone “and they can all go and bombard somewhere else”.

Margaret Simons

Margaret Simons is an author, journalist and journalism academic. She has written numerous books, articles and essays, including the Quarterly Essay Cry Me a River: The Tragedy of the Murray–Darling Basin.


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