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• TSMC’s US$100 billion deal sparks debate about nation’s ‘silicon shield’

  • By Helen Davidson / The Guardian, TAIPEI
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  Taiwan Semiconductor Manufacturing Co (TSMC) chief executive officer C.C. Wei (魏哲家) smiled broadly as he stood next to US President Donald Trump in the White House on Monday, announcing what he said was the biggest foreign direct investment on US soil in history. His company — the producer of most of the world’s most advanced semiconductors — would boost its existing US$65 billion US presence by US$100 billion.

  For TSMC, the deal meant they would avoid massive tariffs Trump had flagged for the global chip industry.

  For the US, it means tens of thousands of construction jobs, and the eventual development of crucial technology on US soil, far away from the threat of China taking control of it if it one day annexed Taiwan.

  

  Flags of Taiwan and Taiwan Semiconductor Manufacturing Co are pictured outsid the company’s headquarters in Hsinchu on Oct. 5, 2017.

  Photo: Eason Lam, REUTERS

  The deal is not set in stone. Under Taiwanese law, TSMC is required to have government approval for any foreign investment of more than US$1.5 billion — a fraction of this deal’s size.

  President William Lai (賴清德) said the government would review the deal with national interests in mind. The Ministry of Economic Affairs on Wednesday said it had not received an application yet.

  However, the deal has rung alarm bells. Members of the opposition Chinese Nationalist Party (KMT) have said it could weaken Taiwan’s security.

  “The more TSMC produces in the US, the lower Taiwan’s geopolitical importance will be, and the less incentive the US will have to help Taiwan,” KMT Legislator Ko Ju-chun (葛如鈞) said.

  Taiwan’s chip industry is seen by many as the nation’s “silicon shield,” a significant piece of leverage to incentivize the world to help keep it — and the globally crucial chip supply — out of Chinese hands.

  Lai’s office said it would ensure that TSMC “will keep its most advanced manufacturing processes in Taiwan,” but that statement appeared at odds with what Wei and Trump said at the White House.

  Wei reportedly said the deal meant TSMC would be “producing the most advanced chip on US soil,” while Trump declared: “The most powerful AI chips in the world will be made right here in America.”

  Asked to define the “most advanced tech” that the government was pledging to keep onshore, given that TSMC’s most advanced product — its 2-nanometer chips — are already scheduled for US production, the ministry appeared to suggest it was human talent.

  It described Taiwan’s science, technology, engineering and math training-to-employment pipeline that underpins the local chip industry’s success.

  “This is highly dependent on Taiwan’s high-quality semiconductor talents, an advantage that is difficult for other countries to replicate,” the ministry said.

  National Chengchi University diplomacy professor Huang Kwei-bo (黃奎博) said the Lai administration needs to heed people’s “rising worry” about the weakening silicon shield.

  Lai and Wei held a news conference on Thursday, where Wei said that he had a “stressful” few days meeting two presidents, and suggested that Lai had ordered him to face the press, because they “must explain this to the public.”

  Lai said the deal was a “historic moment” in Taiwan-US relations. He and Wei provided assurances that the investment would not dilute or hinder the domestic business of TSMC. Both insisted that there was no political pressure from the US, and that it was due simply to increased customer demand from the US. They did not mention tariffs or answer concerns about the security of the silicon shield.

  Huang said it was “reasonable and honest” for Wei to say the expansion was driven by customer demand.

  Tariffs and restrictions on China buying critical chips mean that TSMC’s revenue now overwhelmingly comes from the US.

  “What has remained very vague is the Taiwan government’s attitude and policies,” he said. “The Lai administration should be clear to the Taiwan public both about the potential economic and psychological effect TSMC’s recent decision will cause.”
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