The US is trying to develop a domestic chip industry, but will it work?

The US is trying to develop a domestic chip industry, but will it work?


Chips Ahoy!

 “More chips!” is one of the few orders that would work in both a Mexican restaurant and the White House Office of Science and Technology Policy. But the similarities stop when it comes to picking up the bill:

US President Joe Biden confidently announced the plant would be a “game changer” for the ongoing US efforts to boost domestic tech capabilities. 

Great Chip Triangle

The expansion of TSMC’s business in the US is a big development in the ‘Great Chip Triangle’, a high-stakes game of geopolitics involving the US, China, and Taiwan. One of the saga’s main imperatives – technological supremacy – is pushing the US to aggressively invest in securing its own semiconductor supply chain with Taiwan’s help.

  • Earlier this year, the Biden Administration passed the CHIPS and Science Act, which sets aside $52B in funding to boost semiconductor research, development, and production.

But analysts are split over what this means for TSMC’s and Taiwan’s future. Some worry that US plans to boost domestic manufacturing and reduce its reliance on ‘made-in-Taiwan’ chips will undermine Taiwan’s so-called ‘silicon shield’.

As Rupert Hammond-Chambers, President of the US-Taiwan Business Council argues:

“[t]he US and Europe must walk the line between onshoring vital production capacity while not marginalising and weakening Taiwan economically in the process (which would be to deliver to China one of its core goals).”

Other analysts believe such fears that US investments will weaken Taiwan are overblown. And, as plenty of analysts have noted, these US-based fabs will still be umbilically linked to their headquarters in Taiwan.

  • The two new TSMC fabs won’t be operational until 2024 and 2026, respectively, meaning that Taiwan will remain geopolitically critical for a while yet.

Besides, as Senior Associate at the Center for Strategic and International Studies Paul Triolo notes, “TSMC production in Arizona will be at most 1-2% of capacity on Taiwan when fab starts operations”.

What’s in it for TSMC?

Instead of reducing US reliance on Taiwanese-made chips, having important TSMC fabs on US soil will likely tie the two countries even closer together:

“These fabs be uncompetitive economically and much less of a hedge against Chinese invasion than you might think… TSMC will have to bear the cost but if that is the price of shoring up U.S. support for Taiwan, well, that is the best possible insurance policy the company could buy for its operations that truly matter, which are intrinsically tied to Taiwan.”

Ben Thompson, tech analyst

Latest Author Articles
Intrigue’s 2024 Geopolitical Bingo Card

Before we get back into the swing of things next week, allow us to present the Intrigue 2024 Geopolitical Bingo Card. Basically, we’ve put together 24 predictions for the coming year – some serious, others not.

5 January, 2024
Intrigue’s 2023 in Review

1. Superpower relations The curious case of the Chinese spy balloon It’s not like US-China relations were good before Billings, Montana native Chase Doak spotted a 200-foot-tall object drifting in the sky one sunny February morning… but his discovery certainly made them worse. China first denied it was a balloon meant for spying but somewhat undermined those […]

17 December, 2023
A COP dark side?

We’ve worked at plenty of global summits, including in our former lives as diplomats. They’re exhilarating, frustrating, surreal, and essential parts of how our world works. But they have a dark side, too. Trusted friends have passed us some information on one such dark side now playing out in the margins of the COP28 climate talks in Dubai: sex trafficking.

8 December, 2023
The run-up to COP… 31?

As the COP28 climate talks kick off in Dubai later this month, there are two intriguing tussles playing out for the right to run COP31 in 2026.

17 November, 2023