China Supply Chain Shift: US Reliance on Taiwan, Japan & Korea

Since US President Trump took office at the beginning of this year, Taiwan’s dominance of advanced process semiconductors in the global market has become the primary focus of the US government based on economic security. US Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick have also continued to express their potential risks to the United States when it comes to the concentration of advanced process chips in Taiwan, and even use the oil embargo crisis as a metaphor.

However, Becente’s statement that concentrating the oil crisis and advanced processes on production in Taiwan can show the United States’ importance to economic security. However, Taiwan’s government exchanges, economic and trade complementarity, and defense cooperation are completely different from the relations between Arab countries and the United States, so the two situations cannot be compared.

Chips are as important as oil, but Taiwan is different from Middle Eastern countries.

The US government’s emphasis on Taiwan’s advanced process chip industry, in addition to requiring Taiwanese manufacturers to expand their investment in the United States, many media have also reported that the United States hopes to use chip subsidies to invest in TSMC, but such reports have been denied by Chairman Wei Zhejia. With the US government’s continued high expectations for Taiwan’s semiconductor industry to invest in the United States, many people in China are also worried about whether Taiwan’s semiconductor industry will be removed.

To be fair, even if the semiconductor industry is as important as oil, the chip manufacturing capacity of Taiwan’s semiconductor industry is not directly exploited to produce output. This can only be achieved through the capabilities of business operators, the cultivation of national talents and the R&D investment of related manufacturers. This should be very different from oil exploration.

It is undeniable that for any country, when any important product is concentrated in a few or single country, it may have a negative impact on economic security. However, the reason why Taiwan’s semiconductor industry may have an impact on US economic security is that China raises the geopolitical risks of the Taiwan Strait. China’s escalation of the geopolitical risks of the Taiwan Strait will not only affect Taiwan, but also Japan, South Korea, and the Philippines and Vietnam in the north of Taiwan. The economic security faced by the United States is not that high-end chips are concentrated in Taiwan, but that of China’s security threat to the United States’ industrial supply chain countries. Therefore, the US government requires that Taiwan, Japan and South Korea’s advantageous industries invest in the United States can strengthen part of the US economic security, but the real problem is still the security threat to East Asian supply chain countries.

Advanced Process Investment in Taiwan and the United States is in parallel

Although Chairman Wei Zhejia explained at a press conference at the Presidential Office of my country in March this year that TSMC’s current orders are much larger than their existing production capacity, TSMC still has a huge demand for setting up factories in the future, so Taiwan’s R&D and advanced process technology will not be removed just because of investment in the United States, many people are still worried that Taiwan’s advanced process semiconductor manufacturers’ investment in the United States will harm Taiwan’s economy.

It is worth noting that the China Science and Technology Administration of my country stated on the 27th of this month that the expansion of water conservation-related public works in the second phase of the park will be completed before the end of September. It has also been reported that the TSMC Sino Science and Technology new 1.4-nanometer factory is expected to start construction in October, and the initial estimated total investment amount will reach 1.2 trillion to 1.5 trillion yuan.

If TSMC’s advanced semiconductor factory construction is carried out according to the planning progress, it verifies Chairman Wei Zhejia’s statement that TSMC’s demand for future factory construction in China is still quite large. In other words, the domestic investment of my country’s advanced process semiconductor manufacturers has not been reduced because they have to invest in the United States. Investment in the United States and Taiwan is parallel, and no semiconductor manufacturers will invest in the United States and will cause the problem of Taiwan’s industry being hollowed out.

Finally, from the investment plan of Taiwan’s advanced process manufacturers, we can know that Taiwan’s current yield in 2 nanometers should be much higher than competitors in other countries. In other words, the production cost of Taiwanese manufacturers can be lower than that of other competitors and the quality is better. With the US brand manufacturers such as NVIDIA, Supermicro (AMD), Apple and Microsoft, fully developing the AI industry, the product quality and factory building speed of Taiwanese manufacturers should give American brand manufacturers greater trust, which also shows that the production complementarity between Taiwanese manufacturers and American brand manufacturers is quite high, and the cooperation between manufacturers from both countries will also help improve the productivity and competitiveness of supply chain manufacturers.

(First picture source: shutterstock)

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