We’ve witnessed the achievements of Taiwan Semiconductor Manufacturing Company (TSMC). In 2019, the semiconductor giant’s revenue totaled NT$1.07 trillion (US$36.4 billion). By the first half of 2020, its revenue has already reached NT$621.3 billion (US$21.1 billion), up 35% from the same period last year.

TSMC consistently reports a gross profit margin above 40%, and its second-quarter earnings in 2020 even reached 52.4%, one of its highest margins in recent years. Its tremendous success has been the role model for Taiwanese corporations.

Shouldering social responsibilities for better business performance

TSMC achieves high operational efficiency by maintaining a high level of competence in every aspect. For its semiconductor production, TSMC pours massive resources into research and development. In 2019, TSMC’s R&D spending accounted for 8.5% of its total revenue, almost as much as that of its major competitor Samsung at 8.8%, and TSMC has continued to lead the game in technological innovations.

Since the semiconductor industry is both energy- and water-intensive, TSMC also invests in green power, water resource management, and chemical waste recycling. While these investments help strike a balance between profits and environmental protection, the end goal is to ensure a sustainable operation as a foundation for competitiveness.

Additionally, TSMC employs 51,297 workers, with an average monthly salary of nearly NT$70,000 (US$2,380) for its Taiwan-based employees, about triple Taiwan’s minimum wage. The company’s competitive salary attracts and retains some of the best talent in the country, and this also helps TSMC adapt to the challenges that arise in such a fast-evolving industry.

Related: Minimum Wage: How Did Taiwan Fall Behind S. Korea?

TSMC’s day-to-day impact

However, for average Taiwanese, if we’re neither TSMC’s shareholders nor employees, if we’re not working in related fields, TSMC is mostly just a grandiose name.

Taiwan has a working population of 11.4 million as of June 2020. Almost 5% of this population is in the primary sector, such as farming and fishing, and 35% are in the industrial sector while 65% are in the service sector. TSMC employees only account for 0.44% of Taiwan’s overall working population. Their high salaries are partially spent supporting local retail and service industries, but could be responsible for raising local housing prices.

If we look at the structure of the industry, TSMC products are the key component to all kinds of telecommunications end-products. This turned TSMC into Taiwan’s biggest exporter since 2014. Yet average Taiwanese would hardly get in contact with any TSMC-branded products, we would simply be able to access mobile devices that might have a TSMC manufactured chip within.

Of course, we can reap the benefits of TSMC’s success — if we have the means to purchase the company’s stocks. But statistics from Taiwan Depository & Clearing Corporation show that only 1,460 out of 464,000 TSMC shareholders own over 1,000 TSMC shares — and this 0.3% of shareholders collectively owns 90% of the company. Judging from the small number of shareholders, TSMC’s stock surge is nothing more than a news topic for much of Taiwanese society.

Taiwan’s “national pride” was born out of geopolitics

Economic and wage growth has long been stagnant in Taiwan. Fellow Asian Tigers Hong Kong and Singapore have sprinted far ahead. Even South Korea, the most hard-hit economy during the 1997 financial crisis, has left the past behind and made great advances. Because of its persistent stagnation in the post-“Taiwan Miracle” years, Taiwan has been derided as a “ghost island.”

There is some cause for hope, however, with the U.S.’s economic sanctions on China.

Regardless of President Donald Trump’s intention or overall strategy, the U.S.-China rivalry and the unfolding sanctions against Chinese corporations are prompting global businesses, including those in Taiwan, to rethink the international supply chain order. Taiwan has benefited from the order-transfer effect and returning capital, but we still need time to feel the actual impact on economic growth. Meanwhile, the geopolitical rivalry has already boosted Taiwan’s national pride.

As a vocal ally of Hong Kong’s pro-democracy protests, Taiwan also unified in the latest general elections. As Taiwan has been economically reliant on China while politically resisting Chinese influence, the pro-democracy movement shed light on the value of upholding Taiwan’s democracy and freedom.

As we entered 2020, the coronavirus pandemic has provided Trump with a reason to escalate the U.S.-China trade conflicts. TSMC plays an important role in the U.S.’s attempt to temper China’s high-tech development by pulling in government allies and industry leaders. Taiwan’s success in containing the Covid-19 outbreak also means the domestic economy has kept growing compared to other countries in lockdowns. Capital rushing into Taiwan is also giving the Taiwanese dollar value and stocks a push. At the same time, TSMC became a key driver in Taiwan’s stock market. The question of whether Taiwan’s economy still needs to rely on China seems to have yielded a natural answer.

Geopolitics turned TSMC into Taiwan's "silicon shield"

Former TSMC Chairman Morris Chang once said, “TSMC will be the key battleground for geopolitical strategists.” Indeed, TSMC’s technological capabilities and status are almost unmatched in the global semiconductor industry, and these advantages were undoubtedly going to be a shield in a trade conflict centered around high-tech, intellectual property rights, and patents.

TSMC also became a symbol of pride for Taiwanese because it gave Taiwan a rare chance to shine in an adversarial political economy. On the flip side, if we didn’t experience the fears of becoming the second Hong Kong, or if we didn’t have the Trump intervention, what would TSMC look like to us?

At the beginning of the 21st century, countless international corporations entered China for effective resource allocation. Yet Taiwan’s former President Lee Teng-hui in 1996 declared the policy of “avoid haste, be patient” (戒急用忍), which put a cap on investments in China and effectively prohibited Taiwan’s semiconductor industry from relocating to China. Chang was unhappy with the policy at the time, but 20 years later, Lee’s vision proved to have prevented a hollowing out of the semiconductor industry.

Although corporations relentlessly chase profit maximization and resource efficiency optimization and remove any operational barrier, they also have to make compromises at times and pursue goals other than growth. In the face of the restrictive “avoid haste, be patient” policy, TSMC found its way to thrive. Even in the decision to build a plant in the United States was a patient compromise. TSMC’s best protection, Chang said, was to maintain its competitive advantage and to stand up for its value.

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TNL Editor: Daphne K. Lee, Nicholas Haggerty (@thenewslensintl)

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