I guess some people may question why most of the semiconductors companies are located in China and Taiwan nowadays. The answer is simple and reasoning.

In the case of China, the government pushed to get their semiconductor industry off the ground, because they import hundreds of billions worth of IC every year. Cultivating the semi industry seems like a good idea to cut those imports and elevate domestic enterprises to capture higher value-added products. Due to the highly technical and extremely competitive nature of the industry, they have met with limited success so far. Give them a few a few more trillion RMBs and a few more years to steal technologies things may look different.

In the case of Taiwan, it began more than 30 years ago with a government industrial development officer courting a semi industry veteran in the US, who was previously a VP at Texas Instrument, to head the R&D efforts in Taiwan. The veteran was Morris Chang, who after working in Taiwan for some time, came up with the idea of the pure-play foundry model.

The man is pure brilliance and Taiwan is lucky to have him. He created a truly world-class company, rose to the top of this cutthroat business and enabled the multi-billion dollar fabless IC design industry. Because the Taiwanese government is a major shareholder, it’s cutting-edge fabs are built in Taiwan. As the center of IC manufacturing, a sophisticated ecosystem of equipment suppliers, design offices, and IC packaging providers have formed around TSMC, to provide timely support to technical problems. For an industry that’s characterized by short product cycles, this is a very crucial advantage. Taiwan should remain a major producer if ICs in the foreseeable future.

Another than that, a simple reason is that making semiconductors requires equipment, raw materials, energy, manpower, and miscellaneous resources. Where will you find all of that at a reduced cost as opposed to almost anywhere else? You all know the answer right? Also, many of the war materials used have huge deposits of the necessary ones right there or at least pretty close.  The cutting-edge stuff and classified devices are still made here in the US, Europe, and Japan but these are high dollars chips also. Look at the map above to get amazed at how rich natural resources China are granted.

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