Big Chip in US-China Crisis

For the U.S., it is unthinkable that semiconductor behemoth TSMC could one day be in territory controlled by Beijing, writes Maria Ryan.

An employee at Intel Corporation’s wafer fabrication facility in Chandler, Arizona, moves through its cleanroom in her industrial “bunny suit,” 2018. (Carol M. Highsmith Archive, Library of Congress, Prints and Photographs Division)

By Maria Ryan 
University of Nottingham

One aspect of U.S. House Speaker Nancy Pelosi’s trip to Taiwan that has been largely overlooked is her meeting with Mark Lui, chairman of the Taiwan Semiconductor Manufacturing Corporation (TSMC). Pelosi’s trip coincided with U.S. efforts to convince TSMC – the world’s largest chip manufacturer, on which the U.S. is heavily dependent – to establish a manufacturing base in the US and to stop making advanced chips for Chinese companies.

U.S. support for Taiwan has historically been based on Washington’s opposition to communist rule in Beijing, and Taiwan’s resistance to absorption by China. But in recent years, Taiwan’s autonomy has become a vital geopolitical interest for the U.S, because of the island’s dominance of the semiconductor manufacturing market.

Semiconductors – also known as computer chips or just chips – are integral to all the networked devices that have become embedded into our lives. They also have advanced military applications.

Transformational, super-fast 5G internet is enabling a world of connected devices of every kind (the “Internet of Things”) and a new generation of networked weapons. With this in mind, U.S .officials began to realise during the Trump administration that U.S. semiconductor design companies, such as Intel, were heavily dependent on Asian-based supply chains to manufacture their products.

In particular, Taiwan’s position in the world of semiconductor manufacturing is a bit like Saudi Arabia’s status in OPEC. TSMC has a 53 percent market share of the global foundry market (factories contracted to make chips designed in other countries). Other Taiwan-based manufacturers claim a further 10 percent of the market.

As a result, the Biden administration’s 100-Day Supply Chain Review Report says, “The United States is heavily dependent on a single company – TSMC – for producing its leading-edge chips.” The fact that only TSMC and Samsung (South Korea) can make the most advanced semiconductors (five nanometres in size) “puts at risk the ability to supply current and future [US] national security and critical infrastructure needs.”

Taiwan Semiconductor Manufacturing Company Limited , TSMC, Hsinchu Science Park, Taiwan. (Peellden, CC BY-SA 3.0, Wikimedia Commons)

This means that China’s long-term goal of reunifying with Taiwan is now more threatening to U.S. interests. In the 1971 Shanghai Communique and the 1979 Taiwan Relations Act, the U.S. recognised that people in both mainland China and Taiwan believed that there was “One China” and that they both belonged to it. But for the U.S. it is unthinkable that TSMC could one day be in territory controlled by Beijing.

‘Tech War’

For this reason, the U.S. has been trying to attract TSMC to the U.S. to increase domestic chip production capacity. In 2021, with the support of the Biden administration, the company bought a site in Arizona on which to build a U.S. foundry. This is scheduled to be completed in 2024.

The U.S. Congress has just passed the Chips and Science Act, which provides $52 billion in subsidies to support semiconductor manufacturing in the U.S. But companies will only receive Chips Act funding if they agree not to manufacture advanced semiconductors for Chinese companies.

This means that TSMC and others may well have to choose between doing business in China and in the U.S. because the cost of manufacturing in the U.S. is deemed to be too high without government subsidies.

This is all part of a broader “tech war” between the U.S. and China, in which the U.S. is aiming to constrain China’s technological development and prevent it from exercising a global tech leadership role.

In 2020, the Trump administration imposed crushing sanctions on the Chinese tech giant Huawei that were designed to cut the company off from TSMC, on which it was reliant for the production of high-end semiconductors needed for its 5G infrastructure business.

Huawei was the world’s leading supplier of 5G network equipment but the U.S. feared its Chinese origins posed a security risk (though this claim has been questioned). The sanctions are still in place because both Republicans and Democrats want to stop other countries from using Huawei’s 5G equipment.

The British government had initially decided to use Huawei equipment in certain parts of the U.K.’s 5G network. The Trump administration’s sanctions forced London to reverse that decision.

A key U.S. goal appears to be ending its dependency on supply chains in China or Taiwan for “emerging and foundational technologies,” which includes advanced semiconductors needed for 5G systems, but may include other advanced tech in future.

Pelosi’s trip to Taiwan was about more than just Taiwan’s critical place in the “tech war.” But the dominance of its most important company has given the island a new and critical geopolitical importance that is likely to heighten existing tensions between the U.S. and China over the status of the island. It has also intensified U.S. efforts to “reshore” its semiconductor supply chain.The Conversation

Maria Ryan is associate professor in U.S. history at the University of Nottingham.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

The views expressed are solely those of the author and may or may not reflect those of Consortium News.

22 comments for “Big Chip in US-China Crisis

  1. Freedom1
    August 8, 2022 at 00:19

    Bring the chip making home along with the manufacturing of medicine and growing of food.

  2. Lou e
    August 7, 2022 at 14:56

    You all need to read ‘The Soong Dynasty` by Sterling and Peggy Seagrave to begin to Ppreciate 5he extent to which the US government has been coopted…After the book was published the ‘Taiwanese go to. Sent a hit team to California to kill them…. Sterling was tipped off and they escaped on a boat he had built to an island off the coast of British Columbia….The hit team went for a Chinese dissident in Oakland, next on 5he list….Killed him on his doorstep….Oakland PD HAD THEM IN CUSTODY. Th State debt. Removed and deported them….WAKE UP!!!

  3. doris
    August 7, 2022 at 10:25

    One of my first jobs out of high school was working at Rockwell International making chips for digital calculators and watches in Orange County, CA. I worked at several circuit board manufacturers as well. Then all of those jobs moved out of the country because the greedy bastages didn’t want to pay their employees a living wage, so here we are. Blaming China is ludicrous! Greed, more than any other reason, is why the US is in such dire straights. Its chickens are coming back to roost in more ways than this one.

  4. FriendlyFire
    August 7, 2022 at 10:03

    Interesting, but US interest in Taiwan is mainly as a way to annoy China and lure them into a war, exactly as they used Ukraine to start proxy war with Russia.

    • Danny Weil
      August 7, 2022 at 20:44

      Government aid to transnational corporations is fascism.

      Using worker’s surplus labor to partner with corporations is the essence of Mussolini style corporatism

  5. richard
    August 7, 2022 at 07:25

    for the usa the war is already lost………in chips as well as in ukraine. what you see from washington are delaying tactics. a desperate effort by a once all powerful empire now hanging by its fingernails buying time.

    noting can stop the rise of euraisan integration (china/russia/iran et al) with the concomitant decline of the west. the final score will be in well before the 2020’s conclude and if the perspicacity of european foresight and leadership is any hint the collective west is in for a colossal defeat.

  6. lester
    August 7, 2022 at 04:16

    I wish our Fearless Leaders in the US would concentrate on counterin Global Warming. It could be at least as profitable as military-industrial nonsense. Save our lives, too.

  7. WillD
    August 6, 2022 at 22:55

    The US never plays fair, it seems. Just like all other tyrannical states in history – all of them without exception. You’d think that they could learn from history, even their own recent history of mistake after mistake, blunder after blunder.

    No wonder the aliens stay away! Humans are dangerous and stupid and pose a threat to everything they don’t understand or like. So much for human civilisation. It was a good idea at the time – just like democracy.

  8. Marie-France Germain
    August 6, 2022 at 12:15

    Beside the fact, as some have pointed out here, that China has already started and has developed its own chip manufacturers now, there is also the little problem that apart from the obvious and much commented “live fire exercises” China is conducting all around the island of Taiwan, China has made a law prohibiting the sale of Sable. Sable is the French word for sand, but in this case, not all sable is Sable, a special sand with the rare minerals used in the manufacture of chips which is found in China proper but not on the island. While other countries also have supplies of Sable, they do not have it on the scale of China. So foot shooting is definitely possible for American chip manufacturing either in Taiwan or the USA.

  9. Mike
    August 6, 2022 at 12:15

    The US is actively trying to impede China’s technological progress by the means mentioned here and others, like convincing the Dutch not to sell China the equipment needed to make the most advanced chips. But when the the US cut China off from the microprocessors used in massively parallel supercomputers, China quickly developed their own and in a small number of years had some of the fastest supercomputers in the World. There are some recent reports that China has made chips with the smallest line widths, but it’s not clear that they can do it at scale yet.

    When you hear the USS government voice concerns about security threats, it’s worth listening carefully, because that’s what the US government is doing to us, not necessarily what China might be doing. This gossipy style of propaganda now seems to be the US’s main way of talking about its competitors.

    One more point, I think that US companies fell behind TMSC and others due to the quarterly-profit craze that swept the US
    in the 80s and 90s. Far forward looking research was the norm before this and when quarterly profits became king, this critical research was dropped for short-term gains. Milking the company became the norm and now they have their hand out for a governent bailout. How many times have we heard this?

  10. August 6, 2022 at 11:01

    If US starts developing it’s own Chip, they may not care about Taiwan as mush as they do today. Taiwanese may want to brush up on western history and policies.

    • Guest
      August 6, 2022 at 15:29

      It’s just gross to see the US aimlessly toss 50 billion to prop up losers like Intel who failed to compete with TSMC for all these years. They earn record profits, what is this corporate welfare for? The US government now cries when SMIC through their own means might be entering viable sub-10nm despite sanctions imposed against China prohibiting sales of ASML EUV machines which is basically the only commercial option right now into sub-5nm.

      As to how China arrived at 7nm, don’t know, don’t care. It’s akin to criticizing a bully victim that learned to fight back–does the why or how matter? No one is playing fair.

      When TSMC opens their Arizona plant, I wouldn’t expect US interests to care all that much beyond its borders. That and also free money to Intel which is also catching up slowly squeezing every last sale of its crap. Right now it’s fear-mongering leading the way but like how Hong Kong was reabsorbed without a fight, Taiwan likely goes the same way. Because deep down, they’re all Asians and the sentiment against is blatantly negative as seen in the past few years. I wouldn’t expect the average American to distinguish between Chinese or Taiwanese any better than they can tell apart Ukrainian and Russian.

      Taiwan exists as a political tool, it’s not even associated with actual people. Chips, profits, technological leadership (for now), and the designated victim as an abstract. It’s a different sell than Ukraine but still fundamentally the same nosy behavior in international affairs. While things slowly crumble back home.

  11. Paine
    August 6, 2022 at 09:27

    Polls post-Pilosi’s visit to Taiwan shows that a majority of Taiwanese citizens were not favorable to her visit, as it’s citizenry now fear a China military intervention.

    One can only hope that Taiwan political leadership learns from the lesson from the Ukraine debacle, namely, that it’s better that neighbors live in peace with each other.

    It’s clear that Taiwanese citizens want. .

    • Danny Weil
      August 7, 2022 at 20:46

      If there was a vote in Taiwan today 75% of the people would vote to stay with the Chinese mainland. There is only one China but soon,there will be many roken states in the US and secession looms large.

  12. Dfnslblty
    August 6, 2022 at 09:26

    Rather than attempts at hindering POC or PRC, the usa and the Speaker might allow them freedom to grow so that usa can benefit as a customer — and not perpetually make war with China [ and other nations ].

  13. Henry Smith
    August 6, 2022 at 08:33

    “For this reason, the U.S. has been trying to attract TSMC to the U.S. to increase domestic chip production capacity.”
    As I understand it, the USA has lost/outsourced its Chip manufacturing capability. It has also outsourced/lost a lot of its Chip design capability to Israel. Shortsighted thinking or what ? Destroy your homegrown capabilities just to make a few bucks more profit.
    Also, I believe that the Chinese (mainland) chip manufacturers (SMIC) are already producing 7nm Chips, so Taiwan’s stranglehold may be at risk.
    This is not so much a problem of China undermining the USA, this is rather a case of the USA shooting itself in the foot. Stupid is as stupid does !!

    • Jeano
      August 6, 2022 at 15:45

      Brilliant! 1st we outsource and off shore and destroy manufacturing and lose the middle of the country to… well, anybody!! Now we are insoursing and inshoring and not paying manufacturers to return and letting the middle of the country slip away to T-rump. Makes you wonder who’s captaining the ship of State. Methinks it started with the Clinton’s. Not a good look.

    • Danny Weil
      August 7, 2022 at 20:48

      The Chinese system of government and economics is state capitalism. State capitalism is far more efficient than markets.

      And it is for this reason that China has made the headway it has.

      The US is a backward swamp of unplanned capitalism, or cut throat capitalism.

      • Tim N
        August 8, 2022 at 08:53

        Actually the US is world headquarters of Finance Capitalism.

  14. Realist
    August 6, 2022 at 05:34

    What a joke. The US wages extensive economic warfare around the globe because we so dig freedom, democracy, free markets and laissez faire capitalism? Aren’t we the posturing hypocrites and furtive liars!

    Michael Hudson explained precisely why the American economy is failing and certain to collapse. It has been the financialization of absolutely everything in sight, including educating your children, feeding, clothing, housing them and keeping them healthy, blessing us with the juggernaut of incessant creation of only quasi wealth which is really just dolled up layers of debt upon debt upon new debt and yet more debt which can never be covered when it comes due.

  15. Jeff Harrison
    August 6, 2022 at 01:07

    The US is making a foolish move. They can’t stop China’s advancement. They’ve already broken the code on making 7nm chips. It didn’t work for the British when the colonies became independent and they tried the equivalent with woven cloth. When (not if) China catches up with TSMC, the US will be in the hot seat.

    • David H
      August 7, 2022 at 20:20

      AFAIC net content should be reduced significantly just to text; more data for everyone (like movies; go back to cable) requires more juice. The uses of 7nm chips are to make it more convenient for more people to go through more data, and for defense tech…right? In the first place we need an era where this isn’t such a thang. Don’t know how we’d get there, but don’t we need manufacturing that provides jobs that are a mite more assembler-friendly? Thinking spinning wheels because of your example, though of course…too utopian.

      The un-wind from where we are now would be complicated. Yes, the un-wind from where we are now imo deserves consideration. With the “possible” solar flare [storm] thing in mind, for example, it would seem a good idea to have a TSMC foundry here; since all kinds of replacing would be necessary but shipping and a lot of other things after we got blasted would be all fouled up (but does basic/essential infrastructure tech at this stage need the smallest chips out there?). That’s enough to worry about in peace time, right? While of course in war you’d have tactical nukes firing off this way and that. So I see no good reason to not back off from all this containment hooplah. Back out of it all the way.

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