Hours after Taiwan Semiconductor Manufacturing Co (TSMC) on Friday confirmed it plans to build a 5-nanometer chip factory in Arizona, with mass production expected to begin in 2024, the US government announced new export restrictions to stop foreign semiconductor manufacturers who rely on US software and technology from shipping products to Chinese tech giant Huawei Technologies Co without first obtaining a license from US authorities.
Analysts have said that the new restrictions could enable the US to block the sale of TSMC semiconductors for Huawei’s HiSilicon Technologies Co unit, which designs chips for the Chinese company, potentially affecting its smartphone launches and delivery of 5G equipment.
The White House’s drive to push companies to invest and operate in the US — including the new US$12 billion pledge from TSMC — combined with the US’ tighter export restrictions, increasing pushback against the Chinese Communist Party’s pandemic propaganda, and US President Donald Trump’s harsher tone with Beijing, show that the relationship between the US and China is growing increasingly intense, and the possibility of them decoupling is growing. In an interview with Fox Business on Thursday, Trump even said that the US “could cut off the whole relationship” with China and that he was in no mood to talk with Chinese President Xi Jinping (習近平).
A complete decoupling between the two largest economies is not attainable in the short term, given their close relations and interdependence in terms of trade, production and geopolitics. However, the trend has been slowly emerging since the beginning of the US-China trade dispute in 2018, and has been greatly exacerbated by the emergence of COVID-19, especially considering China’s handling of the pandemic. Not only have US and other foreign companies started to pull away from China, but the US government has considered offering subsidies to firms moving production out of China. Trump last month even threatened to terminate the “phase one” trade deal with China if Beijing fails to meet all of his administration’s demands.
A report released on Monday last week by the National Committee on US-China Relations and the Rhodium Group consultancy said that two-way investment between the countries last year fell to a seven-year low, and their relationship could worsen, given the political frictions between them, regulatory tightening in both countries and changing market dynamics. Moreover, Reuters reported that the US Federal Retirement Thrift Investment Board, which oversees a government retirement fund, on Wednesday announced that it would indefinitely delay plans to invest in Chinese equities due to White House pressure. As well as pushing US companies to bring production back from China, the US government is stepping up its efforts to cut links with the country in terms of capital and supply chains.
Trump’s decision on Wednesday to extend for another year an executive order banning US companies from using telecom equipment made by firms seen as a national security risk — US lawmakers have referred to China’s Huawei and ZTE Corp — the latest export rules and the move to bring chip fabrication back to the US with the help of TSMC all reflect the Trump administration’s concerns about security. Washington views Huawei as part of a broader trade deal with Beijing and is trying to combat China’s global influence economically and technologically.
Talk of a complete decoupling between the US and China might be far-fetched, but hostilities are escalating, which Taiwanese businesses and the government should not take lightly.
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