CC Wei, CEO of Taiwan Semiconductor Manufacturing Co (TSMC), said Covid-19 and the Ukraine war will also continue to disrupt the chip supply chain but stressed that “geopolitical confrontation” is the biggest new challenge facing the industry.

“Geopolitical confrontation has distorted the entire market. Previously, you make a product and could sell it to the whole world. Now, some products are not allowed to be sold, some countries say that you are not allowed to enter, while some say you can only use certain (local) products,” the CEO said in a reference to the tensions between the world’s two superpowers.

“The situation has destroyed all the productivity and efficiency brought by globalisation. Even if saying destroying is too strong, these barriers will seriously affect the benefits of a free economy like in the past. This is really bad.”

The maker of the world’s most advanced semiconductors in recent years has found itself caught in the crossfire of US-China tech tensions.

For example, it is no longer able to serve certain Chinese clients without a US licence due to Washington’s restriction on the use of American technology.

Wei was addressing a local forum hosted by the Monte Jade Science and Technology Association, a leading tech industry association.

It was attended by tech executives, academic professors and government officials.

The most frightening aspect of the current situation, he said, is the disappearing “mutual trust and collaboration”.

“Something I feel very bad about is this weakening of mutual trust and collaborations internationally. Now if you ask the US and China to work together, it isn’t easy. Mutual trust and collaborations were the key for human beings in the past to make advancements, and now this is weakening. It’s not a good sign,” Wei said.

Wei’s comments come shortly after his return from the US, where TSMC is building a US$40 billion chip plant in Arizona amid Washington’s efforts to onshore vital semiconductor production.

TSMC founder Morris Chang, who was also present on the trip, said in a speech that globalisation and free trade were “almost dead”.

At the forum today, Wei also expressed his reservations over countries’ attempts to “control” vital semiconductor production.

“Everyone wants to build their own semiconductor factories, but is that realistic?” Wei asked.

“If it was that easy, there would be chipmaking plants everywhere in the world already.”

A chip industry, he said, requires a complete ecosystem developed by the accumulated efforts of many suppliers and other players over several decades.

“Take TSMC itself, for example. Even within our own company, transferring technology we developed from the Taiwanese city of Hsinchu to our site in Tainan required a lot of hard, painstaking work, never mind moving from Hsinchu to the US,” he said.

At the same time, Wei for the first time said explicitly that politics did not influence his company’s decision to expand in Japan and the US.

“Let me share something. We are in Japan only because this Japanese customer (Sony) is also a crucial supplier to our biggest customer,” he said, referring to Apple.

“And if my biggest customer’s products did not sell well, that will affect my other business as well,” he said.

Sony, which provides image sensors to Apple, and TSMC are jointly constructing a plant in Japan’s Kumamoto Prefecture.

“We never go to set up a plant overseas because of government incentives, or because the US or Japanese governments asked us to go. We will only go to those countries because of our customers’ demand,” Wei said.

“Customers’ needs are our top priority.”

Wei also commented on Japan’s chip ambitions and the likely difficulty of achieving them.

“I won’t say it’s impossible to jump into the chip industry and suddenly overtake other players on the bend and race ahead, but I would say it could be a very difficult task,” Wei said.

“In Japan’s case, I understand they want to build 2-nanometre chips, but I want to ask how about 3, 4, 5, 7, 8, 9, 10-nanometre (chips). It could be a lot of effort going forward.”

The smaller the nanometre size, the more advanced and powerful the chips are.

TSMC, Samsung and Intel are the only companies able to produce such cutting-edge chips and all aim to put 2-nanometre chips into production by 2025.

Japan has big plans to reclaim its place in the global chipmaking world.

Toward that end, Rapidus has been set up with support from the government and top companies such as Toyota, NEC and Sony.

The partners, which have also brought in US peer IBM, aim to produce ultra-advanced 2-nanometre chips by 2027.