Taiwan downplays impact of new restrictions on sand, an important component of semiconductor chips essential for electronics.
China has retaliated against Taiwan over House of Representatives Speaker Nancy Pelosi’s visit by restricting trade with the island nation on several key items.
Chinese commerce and customs authorities said on Wednesday they had halted exports of sand, a key material used in construction, and imports of Taiwanese citrus fruit and some types of fish.
China’s General Administration of Customs said the food imports were halted due to the presence of pesticide and the coronavirus in some shipments, while the Ministry of Commerce said it had suspended sand exports in line with unspecified legal provisions.
China’s Taiwan Affairs Office separately announced it would prohibit mainland Chinese companies and individuals from financial dealings with two Taiwanese foundations, the Taiwan Foundation for Democracy and the Taiwan International Cooperation and Development Fund.
The restrictions include sand, which is an essential component in Taiwan’s semiconductor manufacturing industry. It is important to note that Taiwan manufactures roughly 50 percent of all the world’s semiconductors.
At least Pelosi discussed plans for bringing some of that industry to the US during her brief visit.
Nancy Pelosi did not have much time to spare in Taiwan. But on the Speaker of the House’s controversial visit, she made sure to meet with one of the self-governing island’s most important business leaders, Mark Liu, chairman of Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s biggest chipmaker.
Pelosi included Liu on her short list for good reason. TSMC is the world’s most valuable semiconductor manufacturing company with a $426 billion market cap. The firm produces the world’s most cutting-edge chips, making semiconductors that Americans depend on every day to power their iPhones, medical equipment, and fighter jets.
During the meeting, Liu and Pelosi discussed the U.S.’s recently passed CHIPS and Science Act, according to Taiwanese media. The new legislation includes $52 billion to support chipmaking in the U.S., and TSMC will likely be among its beneficiaries as a result of the $12 billion chip factory it’s planning to build in Arizona.
In response, Taiwan is downplaying the impact of China’s suspension of natural sand export to the country.
Imported natural sand accounted for about 0.64% and 0.75%, or 450,000 and 540,000 tons, of Taiwan’s domestic demand for the past two years, respectively. Only 70,000 and 170,000 tons were sourced from China in 2020 and 2021, respectively, according to the Bureau of Mines.
The bureau added that improved dredging efforts at rivers, streams, and reservoirs mean that Taiwan is reducing its reliance on sand imports. A total of 48.85 million tons of sand and gravel is expected to be produced this year in Taiwan.
Stressing that domestic demand will not be affected by the move, the Ministry of Economic Affairs said the shortage of sand in the northern region will be met by supplies from the northeast, while the country is also looking to increase its imports from Southeast Asia.
It appears more trade disruptions are likely.
Even Pay, an analyst at consultancy Trivium China in Beijing, said more trade disruptions can be expected between China and Taiwan while tensions remain high. She said it was “common practice” for Beijing to identify minor compliance issues and enforce rules very strictly with trade partners, citing the example of Canadian canola after Meng Wanzhou, chief financial officer of Huawei Technologies Co., was detained.
“It looks like stepped up military exercises announced Tuesday night may disrupt shipping in the region through Sunday at least, particularly into ports in Taiwan and Fujian, but also for any cargoes that might typically pass through the area around Taiwan,” said Pay.
However, any disruption will worsen the current shortage of chips that are already impacting many industries.
The global semiconductor crisis isn’t going anywhere anytime soon, but the chairman and CEO for tier 1 auto supplier Bosch hopes the path out will be clearer in late 2023.
In an interview with Automotive News, Bosch chairman and CEO Stefan Hartung said it was impossible for global chip shortages to be resolved this year.
“There will be another important step next year because there will be a change in the economy in general that will impact the demand side of the question,” said Dr Hartung.
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