By Faith Hung, Max A. Cherney and Ben Blanchard
HSINCHU/TAIPEI, Taiwan (Reuters) – Taiwanese contract chipmaker TSMC, whose main customers include Nvidia and Apple, said on Tuesday it has held talks with some customers about moving its chip factories off the island as tensions with China increase, but such a step would be impossible.
Tensions between China and Taiwan have risen sharply since Beijing launched war games around the democratically governed island last month following the inauguration of Taiwanese President Lai Ching-te, whom Beijing labels a “separatist.”
“Instability in the Taiwan Strait is indeed a supply chain consideration, but I want to say that we certainly don’t want wars to happen,” CC Wei, chairman of Taiwan Semiconductor Manufacturing Co (TSMC), told reporters after the annual general company meeting.
He said it would be impossible to move chip factories off the island as 80-90% of production capacity is in Taiwan.
Wei did not name the customers with whom TSMC had held discussions about the possible shift from Taiwan.
TSMC, which has been struggling with surging orders for high-end chips used to provide generative artificial intelligence tools and services, had talks with ChatGPT maker OpenAI over the supply of AI chips, which the Taiwanese company said was “too aggressive “, Wei said, without elaborating.
“He’s very aggressive, too aggressive to believe,” Wei said, referring to OpenAI CEO Sam Altman.
Altman held talks with TSMC last year to discuss a possible partnership to build about three dozen factories to ensure the company could acquire enough silicon to meet their steadily growing needs, according to a source familiar with the case.
The talks were cordial, but TSMC officials made it clear that the number of plants Altman proposed was too large, and TSMC feared it would not be able to operate the plants at the needed capacity of 80% or more, the source said.
TSMC’s projections at the time did not predict sufficient demand for more than 30 new factories.
It was not clear whether TSMC and Altman discussed building their factories outside Taiwan.
“NOBODY WORries”
Despite tensions in China, the topic of a possible war and its impact on chip supply chains barely came up at the annual Computex technology show in Taipei this week, unless reporters raised it with executives on the sidelines.
“No one is worried about this anymore,” Frank Huang, chairman of Powerchip Semiconductor Manufacturing, told reporters at the event, when asked whether foreign customers were putting pressure on Taiwanese companies not to produce there given the tensions.
“I think of course there is always military activity or confrontation, but again, Taiwan is so important for AI – even the Chinese know that. We are fine, no problem,” he said.
Advanced Micro Devices CEO Lisa Su also reiterated Taiwan’s importance in the global chip supply chain when asked how tensions with China and its war games could impact the industry.
“We do a lot of our manufacturing here with key suppliers like TSMC… And then we also have a number of partners who help us build out the ecosystem here in Taiwan,” she had told reporters at the show on Monday.
“The bottom line from our perspective is that it is very important to have a global ecosystem.”
(Reporting by Faith Hung, Max Cherney and Ben Blanchard; Writing by Miyoung Kim; Editing by Gerry Doyle and Rashmi Aich)