In the run-up to Taiwan’s presidential election on January 13, the Taiwan Semiconductor Manufacturing Company (TSMC), the crown jewel of the island’s high-technology electronics industry, has been drawn into the vortex of a hotly contested three-way contest. Most of the debate among the parties has focused on different approaches to urgent domestic issues. A much sharper debate has emerged over the close relationship of the currently elected Democratic Progressive Party (DPP) with the Biden Administration and pro-Taiwan Members of Congress over TSMC’s construction of two chip foundries near Phoenix, Arizona.
The DPP candidate for president, Lai Ching-te, has faced strong criticism from opposition parties, including Hou Yu-ih, of the “Nationalist Party” (the Kuomintang, KMT), and Ko Wen-je, leader of the smaller Taiwan People’s Party (TPP) over rising tensions between Washington and Beijing. Both party leaders say the DPP has jeopardized Taiwan’s security by signaling to China that Taipei is moving towards de jure independence with tacit U.S. support.
The KMT has made several miscues that reinforced its image as soft on China. For example, in 2014 the government of President Ma Ying-jeou touched off the Sunflower Student Movement over its effort to push a trade-in services agreement with China through the national assembly without the required public hearings. The KMT lost to the DPP in the 2016 and 2020 presidential elections, but it won a major surprise victory in the 2018 local elections, mainly on the DPP’s controversial handling of domestic issues.
The opposition candidates see TSMC’s decision to invest as much as $40 billion in two advanced and leading-edge foundries in Arizona as symbolizing that relations between the United States and Taiwan are too close. TSMC is also building foundries in Kumamoto, Japan, in partnership with Sony and Denso, and in Dresden, Germany in partnership with Bosch and two other companies. The Japanese government is subsidizing the project to the extent of the capital cost. The Dresden project enjoys support from a 4.2 billion Euro “European Chips Act,” roughly comparable to the $52 billion U.S. “Chips Act,” and 5 billion Euros from the German government.
Some thirty years after its founding in 1947 TSMC has become a global strategic industry with geopolitical impact far beyond Taiwan’s small size, its 24 million population, and its lack of internationally recognized diplomatic status. TSMC dominates the contract fabrication of over 90 percent of the world’s leading-edge semiconductors, mostly for American companies and more than half of the world’s production of chips overall. Even mainland China depends on Taiwan for about 70 percent of the chips needed to support the world’s largest electronics assembly and motor vehicle industries. TSMC is the exclusive contract manufacturer of leading-edge chips for American companies such as Apple, Google, Nvidia, and Intel. More than half of the company’s institutional stockholders are American, but Taiwan retains the largest stake.
Unlike TSMC’s two foundries under construction in Arizona, initially, at least, the Kumamoto and Dresden foundries will not produce advanced chips in 2-5 nm range but will mainly produce specialized chips in the 28/22 and 16/12 nanometer (nm) range that are designed for specific industrial applications such as image signal processors used in image sensors in the case of Sony, and vehicles in the case of Denso. TSMC and the Japanese government are discussing a second factory that would use extreme ultraviolet lithography (EUV) machines for 7 nm and below by 2025 and even a third foundry to produce 2 nm chips.
Whatever the outcome of the presidential election, TSMC is unlikely to stop responding to the growing appetite of industrialized countries for semiconductor nationalism. Whether all these projects meet the expectations of TSMC and the host countries remains to be seen. However, the foreign policy outcome, including Taiwan-China relations, depends on which of the main parties wins, or if the participation of the smaller TPP requires a coalition government. Any of these outcomes could lead to changes in U.S.-Taiwan relations, but none of the parties to date have called for upsetting the broad status quo among Taiwan, the United States, and the PRC.
Semiconductor Nationalism in the Shadow of Taiwan’s Election
By Richard Cronin
Asia & Indo-Pacific
In the run-up to Taiwan’s presidential election on January 13, the Taiwan Semiconductor Manufacturing Company (TSMC), the crown jewel of the island’s high-technology electronics industry, has been drawn into the vortex of a hotly contested three-way contest. Most of the debate among the parties has focused on different approaches to urgent domestic issues. A much sharper debate has emerged over the close relationship of the currently elected Democratic Progressive Party (DPP) with the Biden Administration and pro-Taiwan Members of Congress over TSMC’s construction of two chip foundries near Phoenix, Arizona.
The DPP candidate for president, Lai Ching-te, has faced strong criticism from opposition parties, including Hou Yu-ih, of the “Nationalist Party” (the Kuomintang, KMT), and Ko Wen-je, leader of the smaller Taiwan People’s Party (TPP) over rising tensions between Washington and Beijing. Both party leaders say the DPP has jeopardized Taiwan’s security by signaling to China that Taipei is moving towards de jure independence with tacit U.S. support.
The KMT has made several miscues that reinforced its image as soft on China. For example, in 2014 the government of President Ma Ying-jeou touched off the Sunflower Student Movement over its effort to push a trade-in services agreement with China through the national assembly without the required public hearings. The KMT lost to the DPP in the 2016 and 2020 presidential elections, but it won a major surprise victory in the 2018 local elections, mainly on the DPP’s controversial handling of domestic issues.
The opposition candidates see TSMC’s decision to invest as much as $40 billion in two advanced and leading-edge foundries in Arizona as symbolizing that relations between the United States and Taiwan are too close. TSMC is also building foundries in Kumamoto, Japan, in partnership with Sony and Denso, and in Dresden, Germany in partnership with Bosch and two other companies. The Japanese government is subsidizing the project to the extent of the capital cost. The Dresden project enjoys support from a 4.2 billion Euro “European Chips Act,” roughly comparable to the $52 billion U.S. “Chips Act,” and 5 billion Euros from the German government.
Some thirty years after its founding in 1947 TSMC has become a global strategic industry with geopolitical impact far beyond Taiwan’s small size, its 24 million population, and its lack of internationally recognized diplomatic status. TSMC dominates the contract fabrication of over 90 percent of the world’s leading-edge semiconductors, mostly for American companies and more than half of the world’s production of chips overall. Even mainland China depends on Taiwan for about 70 percent of the chips needed to support the world’s largest electronics assembly and motor vehicle industries. TSMC is the exclusive contract manufacturer of leading-edge chips for American companies such as Apple, Google, Nvidia, and Intel. More than half of the company’s institutional stockholders are American, but Taiwan retains the largest stake.
Unlike TSMC’s two foundries under construction in Arizona, initially, at least, the Kumamoto and Dresden foundries will not produce advanced chips in 2-5 nm range but will mainly produce specialized chips in the 28/22 and 16/12 nanometer (nm) range that are designed for specific industrial applications such as image signal processors used in image sensors in the case of Sony, and vehicles in the case of Denso. TSMC and the Japanese government are discussing a second factory that would use extreme ultraviolet lithography (EUV) machines for 7 nm and below by 2025 and even a third foundry to produce 2 nm chips.
Whatever the outcome of the presidential election, TSMC is unlikely to stop responding to the growing appetite of industrialized countries for semiconductor nationalism. Whether all these projects meet the expectations of TSMC and the host countries remains to be seen. However, the foreign policy outcome, including Taiwan-China relations, depends on which of the main parties wins, or if the participation of the smaller TPP requires a coalition government. Any of these outcomes could lead to changes in U.S.-Taiwan relations, but none of the parties to date have called for upsetting the broad status quo among Taiwan, the United States, and the PRC.
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