TSMC Moves Closer To U.S., Hinders China's Ambition To Become Techno Hub

With the outlook for Sino-American relations remaining grim, the globally indispensable Taiwan Semiconductor Manufacturing Co. (TSMC) is quietly exploring its options.

Photo Insert: With the outlook for Sino-American relations grim, TSMC announced plans to invest $40 billion to build a second fabricating plant in Arizona.

Stuck in the middle of the 21ST century’s great-power contest, its future will depend on playing a smart long game, Jason Hsu, a former Taiwan lawmaker and senior research fellow at the Ash Center for Democratic Governance and Innovation at Harvard Kennedy School, argued in an analysis for Project Syndicate.

Often referred to as the “Silicon Shield,” Taiwan produces a staggering 65% of the world’s semiconductors and more than 90% of the highest-end chips.

As such, no company is more singularly important to the global economy than TSMC as its advanced and largely unrivaled microchips are indispensable to iPhones, medical devices, missile launch platforms, and many other technologies.

Countries and companies that cannot avail themselves of TSMC’s most advanced semiconductors simply cannot develop certain critical technologies. The company’s decisions thus can bear directly on matters of global security.

With the outlook for Sino-American relations grim, TSMC announced plans to invest $40 billion to build a second fabricating plant in Arizona, where it will make three-nanometer chips (the first plant, for four-nanometer chips, is scheduled to be up and running in 2024).

The company’s decision to locate more production in the US is understandable now that tensions over Taiwan have taken center stage. Following US House Speaker Nancy Pelosi’s visit to the island in August, China conducted unprecedentedly aggressive military exercises, launching missiles near the island and simulating a blockade in the Taiwan Strait.

China is dependent on TSMC for its chips and when the US banned the sale and use of advanced microprocessor fabrication equipment to China, Beijing was flustered.

Then, in October, US President Joe Biden’s administration announced sweeping new export controls designed to cripple China’s ability to produce advanced chips and pursue other high-tech manufacturing.

Although China has invested massively in domestic chip production, the results have been disappointing even if it had resorted to stealing US technology and pirating top-notch computer engineers.

Now, that President Xi Jinping has secured a third term as China’s leader, his regime could retaliate by terminating US tech firms’ contracts to build data centers for provincial governments.

Yet, China is also dependent on TSMC for the advanced chips it needs and its own fabricators cannot produce high-tech chips. It is said to be seven years behind the US and Netherlands in producing fabricating equipment for advanced chips while TSMC itself depends on US equipment and technology in creating its planned 3-nanometer chips.

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