Javier Castro Bugarín
Taipei, Jun 28 (EFECOM).- Taiwan, home to the world’s largest semiconductor manufacturers, aspires to become one of the “nerve centers” of artificial intelligence (AI) development, but does it have enough capacity to absorb the growing global demand for chips?
This question has an uncertain answer: Taiwan has the technical capabilities to produce the most advanced semiconductors on the market, but its multiple energy challenges cast doubt on the future of its production model.
The island, of course, has been preparing for this challenge for “a long time,” especially due to its historical relationship with the companies that lead the AI chip race, such as Nvidia and AMD, says Alicia García-Herrero, chief economist for Asia. Pacific from the investment bank Natixis.
“I believe that Taiwan is going to become a nerve center for artificial intelligence hardware, replicating what happened with semiconductors in the previous revolution, that of computers, tablets and everything that has allowed us to get the most out of Internet,” García-Herrero tells EFE.
As computers, mobile phones and data centers have become more complex, semiconductor manufacturers have created ever-smaller chips, some consisting of nodes as small as three nanometers, which are needed to run today’s cutting-edge AI applications.
Taiwan stands out as the absolute leader in the production of these chips thanks to its flagship, Taiwan Semiconductor Manufacturing Company (TSMC), a company that brings together 60% of the world semiconductor manufacturing market and has Nvidia, AMD, Apple and Qualcomm among them. its main clients.
“We can build very complicated things at very high volume and at very high speed with TSMC (…). This is not normal and you cannot ask (another company) to do it,” Nvidia CEO Jensen Huang said in early June about a firm, TSMC, whose market value has skyrocketed by 65%. so far this year thanks to the rise of AI.
To consolidate its dominance in the sector, TSMC is building two new plants in Taiwan, specifically in the towns of Hsinchu (north) and Kaohsiung (south), where it will manufacture chips with two-nanometer processes starting in 2025.
These new factories require huge amounts of energy to operate, and Taiwan is failing to do its homework on this point: the island is overly dependent on imported fossil fuels and has not sufficiently developed its renewable energy sources, which only account for 9.5% of its total electricity generation.
The threat of a blockade by China, which would hinder energy supplies by sea, adds to the commitment of the ruling Democratic Progressive Party (DPP) to close the last active nuclear plant in Taiwan next year, something that experts view with suspicion given the few alternatives that the island has.
“If the PDP Government does not rethink the closure of nuclear plants and does not advance faster in renewables, this will be impossible,” says García-Herrero when addressing the challenges of Taiwan, whose electricity consumption increased by 15% between 2013 and 2023 thanks to natural gas, its main source of energy currently.
The biggest culprits of that increase are semiconductor makers, especially TSMC, whose electricity spending is on track to rise 267% by 2030, the biggest jump among all East Asian chip companies, according to Greenpeace.
But the government may be changing its stance: Tung Tzu-hsien, a presidential adviser on climate change, has said nuclear power should account for 30 percent of Taiwan’s total energy – it currently accounts for 6.3 percent – arguing that the island’s small size makes it difficult to install solar panels or other renewable sources on a massive scale.
Aware of these fears, Taiwanese President William Lai (Lai Ching-te) promised a “stable energy supply” to turn Taiwan “into an AI island”: the Government is confident that the electricity generation capacity will be sufficient until at least 2028, which will meet the demands of chip factories and AI computing centers.
In parallel, semiconductor companies have chosen to accelerate their international expansion, which constitutes a “successful strategy” for these companies and for Taiwan, in García-Herrero’s opinion.
“That strategy consists of creating multinationals that can produce outside of Taiwan, and that is why you see TSMC in the US and Japan (…). What TSMC is doing is not out of geopolitics, but out of interest, because it will not be able to continue producing enough in Taiwan,” the expert emphasizes. EFECOM
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