The Mystery of Ephraim

The Register / January 5, 2022

A top US Army War College paper suggests Taiwan should credibly threaten to eradicate its semiconductor industry if threatened by China so that Beijing would no longer be interested in unification.

The bright idea comes from two American scholars. Their reasoning goes:

Potential war with the US over Taiwan is no longer a deterrent for China as Beijing believes its military would dominate. Therefore, to make the island unappealing, it needs to be perceived as presenting an “unacceptable economic, political, and strategic costs upon Beijing.” As it currently stands, Taiwan appears to be an enticing technology powerhouse ripe for absorption. However, destroying TSMC, an important supplier for China, would create a desperately unwanted major economic crisis on the mainland and make China chipless while it was also engaged in a war effort.

“If done correctly, such a strategy could discourage a Chinese invasion of Taiwan while simultaneously lessening the chances of an unwanted great-power conflict, especially if combined with good-faith efforts by the United States to make the status quo more tolerable for both China and Taiwan,” wrote the authors.

It’s hard to understate TSMC’s importance to the world. It accounts for more than half of global foundry revenue while in the manufacturing of advanced chips under 10 nanometers it controls about 84% of the global market, according to the European Institute for Asian Studies in Brussels.

Congress has passed a bill that will invest $280 billion over the next five years to boost microchip production and counter China.

With bipartisan support, the CHIPS and Science Act was passed by lawmakers in late July, and President Joe Biden soon signed the bill into law.

Once a leader in semiconductor chip manufacturing, the US has lost ground as other countries like China ramped up production, forcing many American manufacturers to import chips — which are essential to the production of cars, smartphones and medical equipment.

The new funding is intended to help companies bring chip manufacturing back to the US and, as a result, help lower costs and prevent supply chain disruptions.

$52.7 billion for chip manufacturing and research

The package will invest $39 billion over five years to expand domestic semiconductor manufacturing. It will provide companies incentives to build, expand and modernize US facilities and equipment.

The legislation will also create a new 25% tax credit for companies that invest in semiconductor manufacturing equipment or the construction of manufacturing facilities.

Private companies that receive financial assistance will be restricted from expanding certain chip manufacturing in China for 10 years.

This means if TSMC receives any subsidies for its $12 billion plant in Arizona, it wouldn’t be able to expand into China. And there are other crucial factors to consider, too, not least that China is the world’s biggest market for semiconductor sales, at 35% of the global market share, surpassing the US, Europe, Japan, and even Taiwan, which is home to the largest manufacturer of semiconductor chips.

The CHIP law will provide $11 billion over five years to the Department of Commerce to help spur research and development in advanced semiconductor manufacturing, to invest in new technologies and expand workforce training opportunities.

Another $1.5 billion will fund the Public Wireless Supply Chain Innovation Fund to help telecommunications companies compete with Chinese telecom giant Huawei and limit the scope of other telecommunications companies with close ties to China.

Millions of dollars will target workforce development to make sure workers are available to support more manufacturing.

$170 billion for scientific research

The legislation calls for a historic investment in scientific research and development that amounts to nearly $170 billion over five years, an $82.5 billion increase in the federal government’s baseline authorization.

About $13 billion will go to education in the science, technology, engineering and math fields — known as STEM — including scholarships and fellowships, with a focus of increasing access to education in these fields in rural areas.

Universities, community colleges and high schools may be eligible for the money in an effort to strengthen America’s workforce so that it can support new chip manufacturing.

The ‘Chip 4’ meeting led by the US, South Korea, and Japan has kept out Taiwan so far. The US also sought deeper cooperation with Japan and South Korea to compete more with China’s science and technology efforts.

After hollowing out TSMC, the island of Taiwan would be irrelevant even if China takes over TSMC there.

Pretending to be relevant, Taiwan responded by saying it has not been informed of ‘Chip 4’ meeting!

~ by Joel Huan on August 25, 2022.

Posted in China, Taiwan, US