President-elect Trump is pushing for the United States to become the world leader in producing advanced microchips, an industry now dominated by Taiwan that analysts say produces an estimated 90% of advanced semiconductors.
A key issue for the incoming Trump administration is whether to go ahead with the Biden administration policy, announced on Nov. 15, to pay $6.6 billion to the Taiwan Semiconductor Manufacturing Company (TSMC) that is building an advanced semiconductor fabrication plant in Arizona.
Mr. Trump has raised concerns about Taiwan’s dominance over global microchip production, citing ongoing U.S. national security concerns about Taipei’s market reliance on China.
As much as 90% of global leading-edge semiconductor chip production is now concentrated in Taiwan, according to a September 2023 report by the Congressional Research Service.
TSMC is among 50 Taiwan companies that play important roles in other parts of the global semiconductor supply chain, including in chip design; research and development, semiconductor materials like silicon wafers; and assembly, packaging, and testing, the report said.
Taiwan’s government has backed the development of the semiconductor industry since the mid-1970s, providing about half of the initial $200 million in start-up funding for TSMC.
In 2021, TSMC announced plans to invest $100 billion over three years in expanding advanced semiconductor production in Taiwan, including $12 billion for the fabrication facility in Arizona.
Plans also include spending $3 billion for a foundry in China and a new materials facility in Japan.
“TSMC’s most significant and technologically advanced capabilities (e.g., 2-3 nanometer fabrication) are in Taiwan,” according to the CRS report. It warned that China, which is known formally as the People’s Republic of China (PRC), is to be fabricating such advanced semiconductors at TSMC in Taiwan.
“Many PRC firms and institutes — including some that are listed on the U.S. Department of Commerce’s Bureau of Industry Security’s Entity List — appear to be using membership in U.S. open source technology platforms to access the U.S. technology and capabilities to design advanced semiconductor chips that they can then fabricate in Taiwan,” the report said.
The situation has prompted concern among some U.S. officials. Reuters reported in November that the Commerce Department had ordered TSMC to halt shipments of advanced chips to companies in China that are often used in artificial intelligence applications.
TSMC appears to have cooperated with U.S. officials on the matter. Reuters maintained that Commerce had issued its order after TSMC had notified the department that a chip fabricated by the company had been found in an AI processor maintained by Huawei, the China-owned telecom giant that is on the U.S. restricted trade list.
The Taiwan chipmaker recently cut ties with PowerAIR, a Singapore-based company, after a review showed a potential violation of U.S. export controls, the South China Morning Post reported Friday. The review was carried out after a TSMC chip was found in a Huawei Technologies AI processor, three sources told the Hong Kong newspaper.
A spokesperson for TSMC told the news agency at the time that the company is “law-abiding” and “committed to complying with all applicable rules and regulations, including applicable export controls.”
The Commerce Department had previously moved 2022 to restrict U.S. semiconductor design and manufacturing companies Nvidia and AMD from exporting AI-related microchips to China, although there have been no reports of those companies’ chips turning up in Huawei processors. Commerce also issued restrictions on Intel and Qualcomm, two other key players in the U.S. chip sector.
TSMC’s stock has soared
The power that TSMC holds over global microchip production has grown in recent years, and there are indications that the Biden administration’s policy of channeling billions to the company to build a fabrication operation in Arizona has added to TSMC’s prowess.
The Taiwanese company’s stock has risen steadily over the past two years and hit an all-time high on Jan. 6, roughly two months after the administration formalized its $6.6 billion award for TSMC’s Arizona project.
A White House press release in November said the money was awarded to TSMC Arizona Corporation — a subsidiary of TSMC — as part of the 2022 CHIPS Act, which appropriated a total of $52.7 billion to boost U.S. semiconductor manufacturing.
The press release quoted President Biden as saying: “Today’s final agreement with TSMC — the world’s leading manufacturer of advanced semiconductors — will spur $65 billion dollars of private investment to build three state-of-the-art facilities in Arizona and create tens of thousands of jobs by the end of the decade.”
The same period has brought mixed results for U.S. chip design and manufacturing firms. Nvidia’s stock has soared since 2022, but Qualcomm and AMD stocks have largely remained level, while Intel has cratered.
It’s a dynamic that has prompted some to call into question whether TSCMC has a monopoly that deserves antitrust scrutiny.
“I think it’s right to be concerned about anti trust issues,” according to Chris Miller, a historian and author of the 2022 book “Chip War.”
“It’s hard to find a trillion dollar technology company that hasn’t faced antitrust issues, whether you’re Microsoft or
Google, you face antitrust issues. People talk about Nvidia and antitrust issues,” Mr. Miller said during a recent appearance on a podcast produced by the Taiwanese finance, politics and humanities magazine “CommonWealth.”
“I think we shouldn’t be surprised if TSMC faces a similar set of questions,” he said.
It’s a dynamic Mr. Trump has expressed unease about, although it remains to be seen whether he will push to clip TSMC’s wings in favor of pursuing a strategy that gives American firms an edge going forward.
In Trump’s crosshairs?
The incoming president has signaled that he opposes subsidizing TSMC’s U.S. operations and could pull back the funding put in place by the Biden administration.
“Taiwan. I know the people very well, respect them greatly,” Mr. Trump told Bloomberg BusinessWeek in July. “They did take about 100% of our chip business. I think Taiwan should pay us for defense. You know, we’re no different than an insurance company. Taiwan doesn’t give us anything. Taiwan is 9,500 miles away. It’s 68 miles away from China.”
“We’re giving them billions of dollars to build new chips in our country, and then they’re going to take that too, in other words, they’ll build it but then they’ll bring it back to their country,” said Mr. Trump, who blamed “stupid people” who were running the United States for creating the current policy.
“We should have never let that happen,” he said.
Taiwanese officials privately bristled at the comments, and some have chastised Mr. Trump publicly.
“Taiwan did not steal the U.S. chip industry,” Taiwanese Economy Minister Kuo Jyh-huei told reporters in Taipei in September, adding that Taiwan makes chips commissioned by American companies and has an overall focus on bolstering the U.S. chip industry’s manufacturing capabilities.
Mr. Kuo went further by asserting that Mr. Trump has a “misunderstanding” about the situation. “The president has a lot on his plate,” he said, “maybe a friend or a competitor in Taiwan told him that.”
TSMC declined to comment for this article.
However, the company’s CEO and chairman, C.C. Wei, asserted during a quarterly earnings call with investors in October that “TSMC’s mission is to be the trusted technology and capacity provider of the global logic IC industry for years to come.”
“All of our overseas decisions are based on our customers’ needs, as they value some geographic flexibility, and a necessary level of government support,” Mr. Wei said, asserting that “in Arizona, we have received a strong commitment and support from our U.S. customers and the U.S. federal, state, and city governments.”
Mr. Wei added that TSMC expected “volume production” to begin in 2025 at the first of the production facilities the company is building in Arizona.
The situation surrounding TSMC is made all the more complex by the deeper geopolitical dynamics beneath the longstanding relationship that Washington has with Taipei.
Recent years have seen the Communist Party-ruled government of mainland China ramp up threats to use military force if necessary to take control of the autonomously-ruled democracy in Taiwan, which receives defense backing from Washington.
Elbridge Colby, the nominee for the powerful post of undersecretary of defense for policy, has said he favors the destruction of TSMC’s fabrication plants if China follows through on threats to annex the self-ruled island.
In response to a post by Rep. Seth Moulton, Massachusetts Democrat, that TSMC facilities should be blown up if China invades, Mr. Colby said the lawmaker is “absolutely correct about this.”
The notion that the U.S. should bomb TSMC plants in Taiwan drew widespread criticism over the global impact of such a loss.
• Bill Gertz can be reached at bgertz@washingtontimes.com.
• Guy Taylor can be reached at gtaylor@washingtontimes.com.