In recent weeks the Trump Administration has been demanding that Taiwan transfer half of its chip manufacturing to the US. In an interview with NewsNation, US Secretary of Commerce Howard Lutnick said that the US would need 50 percent of domestic chip production to protect Taiwan. He stated, discussing Taiwan’s chip production: “My argument to them was, well, if you have 95 percent, how am I gonna get it to protect you? You’re going to put it on a plane? You’re going to put it on a boat?”
The stench of the Trump Administration’s mafia-style notions of “protection” was strong in Lutnick’s words, and Taiwan was quick to reject the idea. Speaking to the media, vice premier Cheng Li-chiun (鄭麗君) was reported by the Central News Agency (CNA) as saying that the proposal for a “50-50” split in semiconductor production was not even discussed in trade negotiations with the US. The pro-China parties — the Chinese Nationalist Party (KMT) and Taiwan People’s Party (TPP) — always eager to drive a wedge between the US and Taiwan, sharply criticized Lutnick’s proposal as “plunder” of Taiwan’s tech industry.
People often forget that while the government is the largest single shareholder of Taiwan Semiconductor Manufacturing Co (TSMC), it is majority-owned by foreigners. Despite the near-universal local wave of revulsion at moving a large chunk of Taiwan’s economy abroad, it might not be a bad idea to move 30-40 percent of chip production to the US, where a great many of its shareholders reside.
Photo: AP
There are several reasons for this. The first is suppressing the growth of competitors in the US. The Trump Administration, with its inept tariff regime and enthusiastic racism, is probably not competent or open enough to craft competition policies that will threaten TSMC’s current dominance, but the next administration is unlikely to be as stupidly destructive of American scientific and economic prowess. If TSMC is already a powerful presence in the US, that will help stifle the need for a US home-grown alternative. Taiwanese fabs in the US will also attract skilled labor that might otherwise go to competing firms. Recall too that as large Taiwanese firms moved to China, they stifled the growth of competitors at home. That may occur if Taiwan establishes a semiconductor ecology in the US.
Then there is the urgent need for labor. The semiconductor industry, according to a March Global Taiwan Institute piece, is struggling for skilled workers. Focus Taiwan in July reported that the semiconductor industry was short 34,000 people, against 13,000 open positions in 2021 (to put that in perspective, Taiwan will probably see less than 100,000 births this year).
The semiconductor labor shortage problem, already chronic, will only worsen. Other industries are now more attractive to young tech talent, especially with the AI bubble taking potential workers. Moreover, Taiwan is producing fewer STEM graduates. A 2023 Legislative Yuan report said that the number of STEM students fell 17.15 percent from 2012 to 2021, while the number of graduates declined 21.31 percent from 2011 to 2020. In 2022-23 there were 380,000 STEM students at all levels, but that represents an accumulation of many years of births. In 2005 just 206,000 people were born.
Demography is destiny. Taiwan’s current birth rate is going to doom the ability of the nation to maintain a large semiconductor industry structure. Nor are its government and people willing to contemplate a robust and imaginative immigration and population strategy to rescue its firms. Better to offshore production now while the government has a range of choices.
Locating a significant proportion of TSMC production in the US will give the company access to a much larger pool of labor that can be trained and acculturated to Taiwan-style semiconductor production. Additionally, shuttling those workers between Taiwan and the US will enable Taiwan to work its magic on new arrivals, building another cohort of Taiwan supporters in the nation’s most valuable foreign ally.
In 1920, Taiwanese students in Tokyo launched Taiwan Youth (the first of three magazines with that name) and declared that “Taiwan is the Taiwan of the Taiwanese” (台灣是台灣人的台灣). The magazine had an avowed anti-colonial stance, creating a Taiwanese voice for autonomy and democracy in Japan’s imperial capital.
During the heyday of the White Terror and martial law, Taiwanese in the US founded non-profits and promoted Taiwanese democracy. Their voices were instrumental in getting US officials and legislators to put pressure on the KMT to let Taiwan be Taiwan.
We may need voices like that again.
At some point the People’s Republic of China (PRC) is going to attack Taiwan. Commentators are generally obsessed with the invasion scenario. Few consider the postwar reality for the Taiwanese, especially outside of occupied Taiwan. Yet, planning for war means planning for its aftermath. If Taiwan is PRC-controlled, resistance will have to be supported by Taiwanese communities abroad. TSMC fabs in the US, with their large population of educated Taiwanese, could serve as the nuclei of future resistance, as reminders of the Taiwanese spirit and Taiwanese culture, just as the Tibetan spirit is kept alive by the exile communities in India and abroad.
The other alternative is that Taiwan “wins” in the sense that the invasion is defeated. The nation, however, will probably be wrecked — its power grids down, its power plants destroyed, its roads and bridges and ports and railways reduced to ruins, its water systems filled with the detritus of war. TSMC’s fabs in Taiwan will likely become useless after a week or two of combat. Even if the PRC doesn’t hit them, once those complicated etching machines go offline for any long period of time they will have to be cleaned and refurbished, skills Taiwan likely lacks, according to experts I have spoken to.
TSMC plants in the US would then have two roles. First, the US fabs would keep the company going and at least some of its orders filled, a critical need for the world economy. Second, TSMC — partly owned by the government — would produce a flow of revenues that could be used directly to fund reconstruction and defense in Taiwan (there will be more than one war, hegemonic wars between mighty powers are seldom one-offs) and indirectly, as a revenue stream to enable the government to obtain development loans and grants. Moreover, the pool of skilled workers in a TSMC fab ecology in the US could be made available to support reconstruction in Taiwan.
I am not arguing for a massive offshoring of Taiwan’s production capabilities to a foreign power, even a friendly one. But there are good reasons to at least soberly consider what advantages might accrue to Taiwan if a smaller proportion than half could be located in the US.
Or we just follow our usual industrial policy of “more of the same.” It’s been a success, so far.
Notes from Central Taiwan is a column written by long-term resident Michael Turton, who provides incisive commentary informed by three decades of living in and writing about his adoptive country. The views expressed here are his own.
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