The Wall Street Journal - U.S. Taiwan Rep on a Thinning ‘Silicon Shield,’ Trump, TSMC and More | WSJ
Taiwan's semiconductor industry, led by TSMC, is pivotal in global technology due to its production of advanced computer chips. The US has a vested interest in protecting Taiwan from Chinese aggression, partly due to this technological dependency. The 2022 bipartisan CHIPS Act incentivized TSMC and other manufacturers to establish facilities in the US, aiming to bolster domestic chip production. Despite political tensions and criticisms, such as those from former President Trump, these investments are seen as strategic moves to strengthen US manufacturing capabilities and reduce reliance on foreign production. Taiwan's investment strategy has shifted significantly over the past decade, with a notable decrease in investments in China and an increase in the US. This repositioning aligns with US interests in revitalizing its manufacturing sector. The Taiwanese government remains committed to maintaining its technological edge, with advanced chip production initially occurring in Taiwan before potentially moving to the US. This strategy is part of a broader effort to create a 'silicon fortress' through international collaboration. Additionally, Taiwan is increasing its defense spending, partly in response to US suggestions, to bolster its national security amidst geopolitical tensions.
Key Points:
- Taiwan's TSMC is crucial for global advanced chip production, influencing US defense interests.
- The CHIPS Act has led to significant Taiwanese investments in US semiconductor manufacturing.
- Taiwan's investment in China has decreased, while US investments have increased, aligning with US manufacturing goals.
- Taiwan plans to maintain its technological lead by initially producing advanced chips domestically before expanding production to the US.
- Taiwan is increasing defense spending to enhance national security, responding to US suggestions.
Details:
1. 🛡️ Taiwan's Silicon Shield: A Global Interest
- Taiwan produces nearly all of the world's most advanced computer chips, creating a 'silicon shield' that incentivizes countries like the US to defend it against Chinese invasion.
- The 2022 bipartisan Chips Act has led TSMC, Taiwan's largest chip manufacturer, and others to establish semiconductor fabrication plants (fabs) in the US.
- TSMC announced an additional investment of $100 billion USD to expand its manufacturing capacity.
- The Taiwanese representative to the US, Alexander Yu, discussed with the Wall Street Journal the impact of Taiwanese chip investments in the US and its implications on Taiwan's 'silicon shield.'
2. 🤝 Strengthening US-Taiwan Chip Ties
- President Trump criticized the CHIPS Act, calling it a "horrible" program that distributes billions of dollars unnecessarily, highlighting potential policy challenges.
- Despite potential changes to the CHIPS Act incentives, TSMC might still invest in the US due to lucrative revenue opportunities, indicating strong underlying economic motivations.
- Taiwan's outbound investment to China decreased dramatically from 83% ten years ago to less than 9% last year, showing a significant strategic shift in investment priorities.
- Conversely, 40% of Taiwan's outbound investment was directed to the United States last year, emphasizing a growing strategic alliance in manufacturing and aligning with US policy goals to boost domestic production.
- This shift reflects a broader trend of strengthening partnerships between Taiwan and the United States in semiconductor manufacturing, crucial for both economic and geopolitical stability.
3. 🇺🇸 TSMC's Strategic US Expansion
- TSMC's investment in the US aims to produce leading-edge microchips domestically, shifting some production from Taiwan and aligning with US-based clients.
- The surge in demand for advanced chips, driven by AI advancements, highlights the need for increased production capacity in strategic locations like the US.
- Producing in the US strengthens the supply chain connection between Taiwan and the US, ensuring a more integrated and efficient operation.
- TSMC's strategy involves substantial technological investments to innovate and develop advanced chips, starting production in Taiwan and expanding to key markets like the US.
- Challenges may include navigating the US regulatory environment, establishing a skilled workforce, and managing production costs in a new market.
4. 🔍 Evolving US-Taiwan Defense Dynamics
- Taiwan's defense spending has nearly doubled over the last 10 years, reflecting its strategic emphasis on enhancing military capabilities in response to regional security challenges.
- President La has committed to allocating at least 3% of Taiwan's GDP to defense, underscoring the government's prioritization of military preparedness.
- In the past 8 years, Taiwan has spent $26 billion on purchasing weapons, primarily from the United States, indicating a strong reliance on US military technology and support.
- There have been 48 announcements of weapons sales from the US to Taiwan, showcasing a robust defense partnership aimed at deterring regional threats.
- Many of the purchased weapons have not yet been delivered to Taiwan, highlighting potential logistical challenges and the need for timely fulfillment of defense agreements.
5. 🏰 Fortress Taiwan: Semiconductor Safeguards
- There is ongoing debate in Washington about whether the US should destroy Taiwan's semiconductor industry to prevent it from falling into PRC hands in the event of an invasion.
- PRC has invested billions trying to replicate Taiwan's semiconductor capabilities with little success, highlighting the unique human and freedom factors in Taiwan's industry.
- Despite hiring TSMC managers and engineers, China's attempts to replicate TSMC have largely failed, with state-backed companies struggling or failing.
- The inherent value in Taiwan's semiconductor industry lies not just in the technology but in the skilled human capital and the environment in which it operates.
- The notion of 'Fortress Taiwan' suggests a strategy of strengthening Taiwan's defenses through alliances, rather than relying solely on its own capabilities.