- The fate of the global economy may depend on Taiwan-based chipmaker TSMC.
- The company announced last week that it is investing $40 billion in two plants in Arizona.
- Experts disagree on how well this would protect the US economy if China invaded Taiwan.
The US may face a recession next year, but a Chinese invasion of Taiwan could pose a much greater economic threat.
President Joe Biden has touted steps to secure vulnerable U.S. electronics supply chains, but many experts say they are not enough.
Last week, Taiwan Semiconductor Manufacturing, the world’s largest chipmaker, announced it would open a second plant in Arizona, raising the company’s investment in the state from $12 billion to $40 billion.
TSMC expects the two plants, which are slated for completion in 2024 and 2026, to produce more than 600,000 wafers, a thin layer of semiconductor material, annually by 2026.
In a speech at the TSMC facility in Phoenix, Biden said the investment could be a “game changer.”
“These investments help us build and strengthen the supply chain here in America,” Biden said, adding that “American manufacturing is back.”
The US has taken steps to increase domestic chip production as the country depends on TSMC’s factories in Taiwan to make cars, PCs, iPhones and washing machines. The company accounts for more than half of the global semiconductor market, producing most of the world’s estimated 1.4 billion smartphone processors and about 60% of the chips used by automakers.
Should China, which claims the island as its own, invade the island and stop chip production, there could be trillions of dollars in economic losses.
“If China were to invade Taiwan, it would be the biggest impact we’ve seen on the global economy, possibly ever,” Forrester vice president and research director Glenn O’Donnell previously told Insider. “This could be bigger than 1929.
And many experts say it’s just a matter of time before the invasion happens, whether by 2030, 2025 or even by the end of next year.
Arizona investments are unlikely to protect the US economy
While the Arizona plants are undoubtedly a step in the right direction for the US as it seeks to reduce its reliance on Taiwan, experts disagree on how much of an impact they will have once production begins.
Administration advisers argue that they can fully secure the country’s chip supply.
“At scale, these two plants could meet the entire U.S. chip demand when they’re completed,” Ronnie Chatterjee, acting deputy director for industrial policy at the National Economic Council, told CNBC. “That’s the definition of supply chain flexibility. We won’t have to rely on anyone else to make the chips we need.”
But Dylan Patel, principal analyst at SemiAnalysis, a semiconductor research and consulting firm, disagrees. Given that TSMC produced a total of more than 14 million wafers last year, and U.S. companies account for nearly two-thirds of the company’s total revenue, 600,000 wafers a year “wouldn’t be anywhere close to U.S. demand,” he told Insider. in
“It is physically impossible for that factory to meet the needs of the United States,” he said.
Even if production were higher, it would not necessarily eliminate dependence on foreign supply chains either.
“Additional factories are important, but remember that they depend on raw materials, including polysilicon, where the US is not self-sufficient,” William Alan Reinsch, senior adviser at the Center for Strategic and International Studies, a national security center. the analytical center, Insider reported. “Ultimately, creating a more resilient supply chain for semiconductors involves more than fabs.”
Conclusion. Despite the largest foreign direct investment in US history, Arizona factories are unlikely to protect the US economy from the threat of a Chinese invasion of Taiwan.
“The new factories won’t do much to reduce the economic risk of accidents in Taiwan,” Martin Russer, a former CIA official who is now a security and technology expert at the Center for a New American Security, told Insider. “All of TSMC’s advanced capabilities, vital know-how and most of its manufacturing capacity remain on the island.”
To truly achieve supply chain flexibility, Raser says, the U.S. not only needs to boost manufacturing more, but also needs similar investments in all areas of the chip supply chain, from raw materials to packaging.
Reinsch says that “no one” he has spoken to believes that complete self-sufficiency in this area is possible, “so the challenge is to increase our capacity while recognizing the inherent limitations of our ability to do so.”