How Taiwan's Dominance In AI And Semiconductor Industry Impacts The Global Market

The chief of the Taiwan Stock Exchange (TWSE) emphasized the pivotal role of Taiwan in the global AI supply chain and semiconductor industry.

What Happened: Sherman Lin, the CEO of the Taiwan Stock Exchange Corporation, highlighted the significant influence of Taiwan on the AI chip revolution and the broader semiconductor industry. Lin attributed the recent strong performance of the Taiwan Weighted Index to the surging demand for high-end chips and the robust server supply chain, reported CNBC on Friday.

Lin pointed out that Taiwan’s dominance in the global semiconductor industry is largely due to the Taiwan Semiconductor TSMC, the world’s largest contract chipmaker.

TSMC is a key supplier of advanced processors to tech giants like Apple Inc AAPL and NVIDIA Corp NVDA, thus solidifying Taiwan’s critical role in the AI supply chain.

He stated, “I think this is a lot of attraction for investors … So it means, actually, Taiwan plays [a] very crucial role in AI supply chain and also the semiconductor industry.”

In 2023, Taiwan led the world in advanced chip manufacturing technology, including 16- or 14-nanometer and more advanced processes, with a 68% global capacity share.

The country also held nearly 80% market share in extreme ultraviolet generation processes, such as 7-nanometer and more advanced technology, which are crucial in the production of the world’s most advanced processors.

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Despite Taiwan’s strong position, Lin acknowledged the challenges posed by events like the U.S. elections and military conflicts, which can impact the capital markets. However, he expressed confidence in Taiwan’s resilience and ability to respond quickly to such challenges.

Why It Matters: The recent interview with Lin underscores the critical role that Taiwan plays in the global AI supply chain and semiconductor industry. This comes at a time when Taiwan’s semiconductor industry has been facing significant challenges, including a massive earthquake that forced TSMC to suspend chip production.

Despite these challenges, Taiwan has been actively bolstering its ‘chip diplomacy’ with countries like Canada and France, and has also seen a significant shift in its export market, with the U.S. overtaking China as its biggest export market for the first time in over 20 years.

Additionally, TSMC recently cautioned that the red-hot growth in the chip industry could be cooling down, citing a potential decline in automotive chip demand. Despite these challenges, Taiwan’s strong fundamentals and resilience, as highlighted by Lin, continue to position the country as a key player in the global semiconductor industry.

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