Controlling the Uncontrollable: The Migration of the Taiwanese Semiconductor Industry to China and Its Security Ramifications

By Chu, Ming-Chin Monique | China Perspectives, January 1, 2008 | Go to article overview

Controlling the Uncontrollable: The Migration of the Taiwanese Semiconductor Industry to China and Its Security Ramifications


Chu, Ming-Chin Monique, China Perspectives


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Introduction

This paper reports preliminary findings of a qualitative single case study that explores the relationship between globalisation and security by focusing on the strategic aspects of the migration of the chip industry from Taiwan to China.

From the outset, the wave of contemporary globalisation has shaped the way we think about security in terms of its agency and scope. The extension of security threats beyond the military and the state have motivated some scholars to call for a broad-based and multidisciplinary agenda for secu- rity studies, known as the "widener's approach to securi- ty."(2)

Following this approach, my study focuses on the sector- based security issues arising from the migration of the strate- gic semiconductor industry across the Taiwan Straits, a potentially explosive flashpoint in world politics today.

Semiconductors, globalisation and security

Setting t he Scene

The significance and relevance of the case study lie in the following aspects: First, the semiconductor industry has demonstrated its significance to the economy and defence of the countries involved since its inception in 1947, marked by the seminal invention of the transistor at the world-renowned Bell Labs. Following Moore's Law, the empirical observa- tion Gordon E. Moore made in 1965 forecasting that the number of transistors on an integrated circuit (IC) for mini- mum component cost doubles every 24 months, the growth of the semiconductor industry over the past few decades has been largely associated with the ability to steadily shrink the transistor and increase its speed without increasing cost. (3) Today, chip components available at the end of the industry supply chain permeate consumer electronics, personal com- puters, communications, automobiles, aerospace, and mili- tary end-uses (see Fig. 1). Global sales of semiconductors reached US$247.7 billion in 2006, with sales growth large- ly driven by popular consumer products such as MP3 play- ers and cell phones. (4) Its significance to the United States economy and national security, for instance, was grasped in a report by the US National Advisory Committee on Semiconductors in 1989. The report contends:

The semiconductor industry is strategic to America. The industry is the foundation of the information age, playing a crucial role in the consumer electronics industry, and other industries that have a high elec- tronic content in their products. America's national security also depends on the semiconductor industry. United States and NATO forces rely on the techno- logical advantage of advanced semiconductors to offset the numerical superiority of potential adversaries.(5)

Second, the very existence of various related regulatory regimes at the multilateral, bilateral, and unilateral level involv- ing the three major state actors further bespeaks the strategic nature of the semiconductor industry. At the multilateral level, the Wassenaar Arrangement, established in 1996, includes semiconductor items, equipment, materials, and technology on its Control Lists. As updated at its December 2005 Plenary meeting, Wassenaar identifies its criteria for the selection of dual-use items as follows: "Dual-use goods and technologies to be controlled are those which are major or key elements for the indigenous development, production, use or enhancement of military capabilities." As such, current Wassenaar regulations stipulate that lithography equipment capable of "producing a pattern with a minimum resolvable feature size of 180nm or less" is controlled, and intended export to China requires permission from pertinent Wassenaar member states. (6) In 2005, the US gave the green light to the sale of 65nm process technology to Semiconductor Manufacturing International Corporation (SMIC, zhongxin) in Shanghai, as SMIC CEO Richard Chang (Chang Ju- ching) announced at the Third China International Industry Exhibition in Beijing on 24 August 2005. …

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