China-Taiwan tensions reminding Canada’s tech firms to diversify chip manufacturers

Canada's technology industry says flaring tensions between China and Taiwan are reminding companies how important it is to seek a broader range of sources for semiconductor.

Canada’s technology industry says flaring tensions between China and Taiwan are reminding companies how important it is to seek a broader range of sources for semiconductors– and to invest in the sector.

Relations between the two Asian countries have become increasingly tense in recent months as China, in a show of power, carried out military drills around Taiwan, home to the world’s largest contract microchip maker.

If tensions persist and move beyond a drill, deliveries of the Taiwan Semiconductor Manufacturing Company (TSMC)’s semiconductors, known as chips, to big-name brands could slow or be halted. TSMC chips power a slew of electronics ranging from iPhones to Lockheed-Martin fighter jets.

“We are exposed, of course, as all countries in the world are exposed,” said Hamid Arabzadeh, chief executive of Ranovus, an Ottawa-based technology company.

Taiwan was responsible for 60 per cent of the global revenue in 2020 for the sector and TSMC held 53 per cent of the global foundry market in the third quarter of 2021, Taipei journalist Matthew Fulco wrote in a Macdonald-Laurier Institute publication released in January.

The article added the company, which dwarfs Samsung’s 15 per cent market share with 85 per cent of the market, is of particular importance because it has a “near monopoly” on the most advanced chips– 10 nanometres or smaller– and has mastered producing them with less energy.

Meanwhile, Canada has a lack of semiconductor foundries and building new ones rivalling TSMC’s capabilities would take so much capital and time, Arabzadeh said it’s almost inadvisable.

Keith Jackson, then-chair of the Semiconductor Industry Association in the U.S., said in Fortune magazine in 2020 that these facilities can cost up to $20 billion to build, nearly twice as expensive as a modern aircraft carrier.