Should the U.S. fight or embrace TSMC?

January 25, 2022, 7:13 PM UTC

Exactly one year ago today, Bloomberg published a story with a prescient headline: “The World Is Dangerously Dependent on Taiwan for Semiconductors.”

The investigation explored the perils of Taiwan Semiconductor Manufacturing Co., or TSMC, fabricating about 90% of the world’s most technologically intricate chips, including those found in iPhones and other major Apple products. The monopoly gives TSMC and Taiwan remarkable geopolitical leverage, but also spotlights the potential economic fallout of an invasion by China, which claims the island as its own territory.

Fast forward 12 months, and TSMC only continues to grow. The Wall Street Journal reported Tuesday that TSMC is now the most valuable company in Asia, surpassing China’s Tencent with a market cap topping $600 billion. Semiconductors rank among the world’s most in-demand commodities amid a pandemic-induced shortfall, leading to higher chip prices that are padding TSMC’s bottom line.

Recognizing the economic and national security threat posed by TSMC’s dominance, President Joe Biden and many members of Congress are pushing to back the CHIPS Act, which would funnel $52 billion in subsidies for domestic semiconductor manufacturing. The U.S. Senate passed its version of the bill in July, and House Speaker Nancy Pelosi said last week that the lower chamber will soon take up the legislation.

Biden and CHIPS Act supporters have turned the proposed subsidies into a straightforward argument: the U.S. needs more chips, we’ve fallen way behind foreign competitors on semiconductor manufacturing, and we need to catch up. The federal funds wouldn’t solve immediate chip supply problems, which the Biden administration predicts will last at least through the second half of 2022. However, the legislation would bring the U.S. in line with other countries that heavily subside the chip industry.

Still, Biden and legislators have yet to make a strong public case for exactly how the U.S. should regain strength on the semiconductor front.

The ideal nationalist outcome involves California-based Intel, with the help of CHIPS Act money, re-establishing itself as the world’s dominant semiconductor player after losing ground to TSMC and South Korean giant Samsung. In theory, Intel could become a high-volume, sand-to-silicon chip maker, cutting off as many foreign supply-chain choke points as possible in the process.

“Every aspect of defense, intelligence, government operations is becoming more digital,” Intel CEO Pat Gelsinger wrote in a CNN op-ed last month. “And we want to rely on foreign technology for those critical aspects of our defense and national security? I don’t think so.”

Intel heralded an early part of its planned rebirth last week, announcing its intention to spend $20 billion to $100 billion on a manufacturing development in Ohio. Company leaders hope to get CHIPS Act funds to help underwrite some of the costs.

The problem: there’s a reason Intel lost ground to TSMC. The Taiwanese company had superior management, staffing, and domestic support in recent years. There’s a reason Apple crosses the Pacific for its chips instead of partnering with its Bay Area neighbor.

CHIPS Act money could help TSMC bring more production to American soil, building on the company’s in-motion plans to open a $12 billion fabrication plant in Arizona by 2024. TSMC certainly wants that, evidenced by its rare smackdown of Intel last month.

Although unlikely, what happens if Taiwan falls to China in the near future? Would that money be better spent on domestic companies, as Gelsinger has suggested?

The CHIPS Act certainly aims to solve an important dilemma. Before the ink dries on any legislation, however, leaders in Washington need to offer more specifics on who will benefit and what outcomes they hope to produce.

Want to send thoughts or suggestions for Data Sheet? Drop me a line here.

Jacob Carpenter


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From the article:

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Busted on the highway. Apple’s AirTags certainly come with their fair share of privacy concerns, but here’s one clever use for them. As The Washington Post reported Monday, a Colorado woman used an AirTag to secretly track her family’s belongings as they were shipped across the country last month. When the goods didn’t show up in New York on time, she called the mover and caught him lying about where the shipment was parked, helping to ultimately expedite the process. Even moving companies can’t get away with anything these days.

Editor's note: This story has been corrected to reflect the accurate location of Samsung's headquarters.

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