UK To Boost Domestic Semiconductor Supply, Reduce Reliance On TSMC Over Geopolitical Risks: Study

Britain prepared to reduce reliance on semiconductors from Taiwan, fearing a threat from China and a possible invasion of the Asian island country, a draft strategy suggested.

Any repercussion from China could compromise supplies to and from the Asian island nation, which is home to over 90% of the manufacturing capacity for all leading-edge chips, including the biggest silicon foundry Taiwan Semiconductor Manufacturing Company Ltd TSM, Bloomberg reports.

Semiconductors are integral to everything from cell phones to cars, and crises can disrupt supply chains across the economy, especially highlighted during the pandemic.

Also Read: TSMC Starts Commercializing Next-Gen Chips To Tap Growing Demand From iPhones, Internet Servers And Supercomputers

The document highlighted the geopolitical and economic importance of the supply chain crisis.

It said that Britain should diversify with other sources of microchips from friendly and secure nations while earmarking billions of pounds more in research and development.

The study said the government should back compound semiconductors which are helpful in electric vehicles, 5G wireless, and other emerging technologies.

The U.S. Chips Act has earmarked $53 billion, while the European Union could dedicate investments worth €43 billion ($47 billion) to create sovereign silicon supplies.

U.K. government officials who drew up the paper also warned against Chinese-backed acquisitions of British chip businesses posing potential national security challenges.

The U.K. government remained committed to convincing Softbank Group Corp SFTBF SFTBY owned British chip designer Arm Holdings into a London listing.

Britain's inaction to boost domestic semiconductor supply has fueled concerns over national security among officials and frustrated companies and investors.

Rising Taiwan-China and U.S.-China tensions have brought "more serious" challenges for the semiconductor industry, TSMC Chair said Mark Liu acknowledged in 2022.

While the chips sector is already bracing for sagging demand as red-hot inflation squeezes spending, Taiwan faces a stricter situation sandwiched between its largest export market China and its main international backer and arms supplier, the U.S.

Price Action: TSM shares traded higher by 1.07% at $89.35 in the premarket on the last check Friday.