US-made TSMC chips may cost more; US influences risk of Taiwanese invasion – Liu

US-made TSMC chips may cost more than the same ones made in Taiwan, suggests a new piece today, following an interview with company chairman, Mark Liu. The Arizona plant will make chips for older Apple devices.

Asked about the risks of China invading Taiwan, Liu suggested that this mostly depends on the state of diplomatic relations between the US and China …

US-made TSMC chips may cost more

TSMC’s Arizona chip plant financing has always been contentious. Within a month of the announcement, it was revealed that the company was seeking huge subsidies from the US government in order to proceed. Apple supported this bid for subsidies, lobbying on TSMC’s behalf – but TSMC has been demanding twice as much cash as initially offered.

Since then, costs have spiraled, and a NY Times piece based on an interview with Liu suggests that this may be reflected in the prices charged to clients like Apple.

Doubts loom over whether American companies will be willing to pay the likely premium required for chips made in Arizona, where TSMC’s construction costs alone could be at least four times higher than they are in Taiwan. Mr. Liu said he had told the U.S. government that it needed to offer American companies incentives, beyond the $52 billion in subsidies in the CHIPS Act, to buy American-made chips.

While Apple may buy some US-made chips for PR reasons, it seems unlikely it would be willing to pay a premium to purchase more than a token number of them.

US influences risk of Taiwanese invasion

The risk of a Taiwanese invasion by China has been an ever-present one, given that the Chinese government considers the island to be part of its territory, but fears of this happening have significantly increased in recent years – for two reasons.

First, as we argued in March of last year, the relatively weak global response to Russia’s invasion of Ukraine is likely to have emboldened China.

Putin just demonstrated that the West cannot take any kind of military action to defend the Ukraine; the threat of all-out nuclear war is just too terrifying. All our military forces can do is sit back and watch, and hope the economic sanctions will ultimately prove effective.  The same would be true of Taiwan. 

A few months later, US and UK security services expressed the same concern.

Second, deteriorating diplomatic relationships between China and the US have seen the Chinese government go as far as rehearsing a full-scale blockade of Taiwan – a likely interim step before an invasion.

Some believe that TSMC’s advanced chipmaking skills – which China has historically relied upon as much as anyone else – provides Taiwan with a shield against invasion. But with US sanctions increasingly limiting TSMC’s sales to Chinese companies, the effectiveness of that shield is ever declining.

Mr. Liu rejected the idea of the “silicon shield”: that Taiwan’s chip-making prowess deters military action by China and brings support from the United States. Both need Taiwan’s chips.

“China will not invade Taiwan because of semiconductors. China will not not invade Taiwan because of semiconductors,” he said. “It is really up to the U.S. and China: How do they maintain the status quo, which both sides want?”

Phoenix, Arizona, photo: Nader Abushhab/Unsplash