On January 15, Taiwan and the United States of America signed a significant trade deal. On its side, Taiwan earmarked a total of $500 billion for investment in the U.S. semiconductor industry. In exchange, the U.S. dropped its tariff rate on Taiwanese goods from 20% to 15% and allowed for limited duty-free exports for chip companies investing in stateside soil, among other benefits.
The deal has been inked but is pending ratification from the Taiwanese Executive Yuan, and those $500 billion are split between $250 billion in private investment and $250 billion in lines of credit from the Taiwanese government to chipmakers wanting to invest stateside.
The documents don't make any specific mention, but the exchange is mostly about TSMC, the company that manufactures about 90% of the world's advanced chips (5 nm and below), and fabricates almost every AI and smartphone chip of relevance. The firm, and by extension its nation, is currently the only shop if you want a high-end computer chip made, particularly if said unit needs 2 nm transistors.
Tricky geopolitics
(Image credit: TSMC)
The geopolitics involved are easily described but tricky to navigate: nearby China has long had aspirations to embrace Taiwan into its fold, but North-American companies represent 75% of TSMC's revenue. Plus, it's the only company mass-producing cutting-edge chips for the entire world. This situation is thus described as Taiwan's "silicon shield," and many believe it's the only reason why China hasn't taken over.
As for the United States, the nation has long wanted to curb its nearly exclusive reliance on an external source for advanced chip manufacturing. It's not the only country in this situation; plus, it's never a good idea to have all the eggs in one basket. Many companies are building chip factories outside Taiwan, especially since the COVID crisis illustrated how tightly woven worldwide supply chains are.
The problem is, erecting fabs is an exceedingly time- and money-consuming endeavor. TSMC's Arizona three-fab facility is top-notch, but costs around $55 billion per individual factory. Samsung's Texas fab is going on over $40 billion, and the price tag for Rapidus' Japan build is over $30 billion. All these price tags are significantly higher than those from Taiwan (or South Korea), and it takes multiple years to get just one fab fully set up and ready.
Production still face numerous challenges
(Image credit: Intel)
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