(ELI5) What is it about Taiwan that makes it a good spot to produce computer chips?

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(ELI5) What is it about Taiwan that makes it a good spot to produce computer chips?

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Intense prior investment.

High tech manufacturing really relies on having an experienced workforce and well developed facilities. Both of those require time and money.

Many companies offloaded their electronics manufacturing into Taiwan due to cheaper labour and utilities in the past. Now Taiwanese companies have the people, the knowhow, the facilities and the money to both do what others do but cheaper (due to economy of scale and experience) AND innovate beyond that.

To catch up, others need to put in exactly as much human and monetary investment as Taiwan already had to this date, but most likely without seeing profit for decades (because they can buy from a cheaper, trustworthy source, i.e. Taiwan).

Of course, it still is worth doing by nations for matters like supply independence etc. But business-wise, it makes sense to buy from Taiwan.

The same thing that makes Hollywood a good spot to produce movies – everybody else’s investments. Taiwan has supported huge investments by all the possible chip companies and their suppliers. This investment has made TSMC, their flagship chip maker, the low cost fab of choice, making a staggering 1/2 of all the chips made in the world.

Why did the government invest like this? I don’t know, I’m not in the Taiwanese government, but a huge business that could collapse the world economy if it were destroyed during a Chinese military invasion of their island is not a bad reason.

They have the infrastructure in place already. They invested in building several wafer fabs of various sizes and they coordinate fairly well. If your part only requires a 4 inch line, they can accommodate you. If your product works better on a 16 inch line, they can take care of that as well.

They grow their own silicon and have been doing this for long enough that the process is well understood.

It also helps that their laws regarding the use of hazardous chemicals such as phosphene and diborane amongst others tend to support industry.

Has nothing to do with what anyone here is saying any longer. It’s ultimately down to how Taiwan subsidizes this industry as the bedrock of their greater innovative technology sector. That’s it. Incremental or scalable cost, margin and innovation is undifferentiated and frankly less enviable than most other countries at this time.

TSMC is one of, if not, the world’s largest chip producers. The facility is nearly unmatched to anything and research done there is top notch. Back in the day western companies established the infrastructure there and sent blueprints of chips to be made there for cost effective reasons.