The most important company in the world

HSINCHU, Taiwan – “If China takes Taiwan, they will turn the world off, potentially,” Donald Trump told Fox News recently, apparently referring to a potential seizure of one company that is central to, well, pretty much everything. Indeed, it’s arguably the most important company in the world.

The company Trump alluded to, Taiwan Semiconductor Manufacturing Co., or TSMC, is the only corporation I can think of in history that could cause a global depression if it were forced to halt production.

These days it seems impossible to have a conversation about geopolitics or economics without coming back to TSMC, which makes about 90 percent of the world’s most advanced chips. If the lights went out here in Hsinchu, in the company’s ultraclean and ultrasecure buildings, you might not be able to buy a new phone, car or watch. Armies could run out of precision-guided missiles and hospitals could struggle to replace advanced X-ray and MRI machines. It might be like the COVID-19 supply chain chip disruption – times 10 – and TSMC, unfortunately, is situated in a region where war is possible and could threaten production.

“Taiwan Semiconductor is one of the best-managed companies and important companies in the world,” Warren Buffett said last year. But he sold his $4-billion stake in TSMC because, he said, “I don’t like its location.”

Some believe – it appears this may be Trump’s view – that TSMC is so valuable that it might tempt China to try to grab Taiwan, and then bring the world to its knees.

“The more you talk about silicon, the less rational people become,” Mark Liu, the chair of TSMC, told me.

So let’s try to have a nuanced conversation about TSMC, its significance and its vulnerabilities.

For starters, TSMC’s factories, or fabs, would probably be useless to China after an invasion, even if engineers remained on the job and even if the fabs weren’t bombed by American or Taiwanese defenders to keep them out of China’s hands. That’s because the chips are designed in other countries and require international networks to keep production going. To China, TSMC would be about as useful as a dead phone.

What happens in these fabs – 24 hours a day, seven days a week, for the work is done by nonunion, unprotesting machines – is astonishing. TSMC has transformed an industry that now measures its work in nanometers (billionths of a meter). A human red blood cell is around 7,000 nanometers wide, and TSMC is now developing 1.4-nanometer chips.

“There’s nothing like the TSMC plants,” Matt Pottinger, a longtime Asia hand who was deputy national security adviser under Trump, told me. “It’s really black magic.”

But black magic requires enormous amounts of energy – TSMC single-handedly consumes perhaps seven percent of Taiwan’s electricity – and that creates a risk. Even if China couldn’t take over TSMC fabs, it could disrupt production as a way of putting pressure on Taiwan and the West simply with cyberattacks on the grid.