Political uncertainties in semiconductor manufacturing In an emergency, the EUV machines of TSMC will be remotely disabled

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What would happen if the political situation between the People's Republic of China and Taiwan were to escalate? Could the People's Republic take over the highly modern EUV lithography machines of Taiwan's semiconductor production? They might be able to, but ASML and TSMC would have means and ways to shut down the machines remotely, so that they could not be used, Bloomberg reports.

Unfortunately, there are daily political tensions in the world, many of which have existed for decades. One of the most tense conflicts exists between the People's Republic of China (Mainland China) and the Republic of China (Taiwan). The China-Taiwan conflict has been brewing since 1949 and tensions have flared up again and again in recent years. The People's Republic of China views Taiwan as part of Chinese territory, while the Republic of China continues to see itself as a sovereign state from which mainland China has separated.

Not only the governments of China and Taiwan are concerned with what will happen if the People's Republic's forces were to try to take over Taiwan. After all, the heart of the world's semiconductor production beats in Taiwan. It is estimated that the world's largest contract manufacturer TSMC produces 90 percent of the most advanced processor chips (via Citigroup in January 2024); a large part of it in Taiwan. The chips are used for many products, from data centers to smartphones. This is partly because production costs there are relatively low compared to other regions and countries.

What happens if the supply chain is disrupted and semiconductors suddenly become scarce was already observable during the corona pandemic. What would happen if China invaded Taiwan and wanted to take possession of ASML's highly advanced EUV exposure systems, which are used among others by TSMC?

Emergency stop for the lithography devices

This question is reportedly also being considered by various governments, primarily the US and the Netherlands. Should China want to take possession of TSMC's machines, they could be remotely shut down with a so-called kill switch, both by the people in charge at TSMC and by ASML. This news, which Bloomberg's authors claim to have learned from internal circles, is making the rounds at a time when the so-called chip war between China and the US is once again escalating.

Just recently, US President Biden announced tariff increases for certain products from China; for several years now, US and other companies have been subject to sanction requirements regarding the chips and technologies that can be exported to China. For instance, the most up-to-date, and now even older EUV models from ASML can no longer be brought into the People's Republic, nor can the latest AI chips from AI tech leader Nvidia.

"However, US concerns about a Chinese invasion of Taiwan persist, and Washington has expressed them to Dutch and Taiwanese officials, as Bloomberg reports. At a meeting with the company, ASML assured Dutch officials of the option to trigger the 'kill switch,' according to the media company. According to Bloomberg, the option applies to ASML's advanced extreme ultraviolet machine product line," Business Insider picked up on the Bloomberg report.

What if ...

Disconnected from morality and ethics: From a global economic production point of view, it is clear to many people that such an action, open aggression from the People's Republic of China towards Taiwan, would be a worst-case scenario. Although TSMC and co. are establishing factories in other countries and regions, it will be some time before they start full operation.

As Dr. Jun He, Head of Corporate Quality & Reliability at TSMC, reported at the TSMC Symposium on 14 May 2024 in Amsterdam, production is expected to start in Fab 21 in Arizona in 2025. Fab 24, the ESMC project in Dresden, Germany, will only be able to start operations in 2027, similar to Fab 23 in Kumamoto, Japan. The global demand for semiconductors will likely have increased rather than decreased by then.

"Nvidia CEO Jensen Huang told Bloomberg TV that the global technology sector will likely continue to depend on Taiwanese manufacturers for 'some time.' He said it would otherwise be 'very difficult' for Nvidia to serve its customers," also noted the authors of Business Insider.