The administration of US President Joe Biden on June 4 released a 100-day supply chain review titled “Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-based Growth.”
It lays out just how much the US — and the global economy — relies on Taiwan and its semiconductor industry.
From the US perspective, this reliance is considered a national security vulnerability.
The vulnerability is not limited simply to Taiwan, but also to the reliance on a cluster of additional countries all located in East Asia, mainly China, South Korea and Japan. The supply chain review explains
in excruciating detail how
semiconductors are designed, manufactured and packaged, making it easier to understand how the US lost its edge in this industry to Asian countries, with Taiwan being given a “spotlight.”
After reading the review, it is safe to say that the world runs on Taiwanese semiconductors. The administration notes that fact: “The global economy depends on Taiwanese firms for 92 percent of leading-edge semiconductor production.”
This reliance was a cause for concern under the administration of former US president Donald Trump, which was able to negotiate with Taiwan Semiconductor Manufacturing Co (TSMC) to build manufacturing centers in Arizona. Under the Biden administration, the US’ focus on Taiwan and its semiconductor industry should certainly continue.
Judging by the supply chain review, the US has much ground to make up — which could take time, many years and billions of dollars — to reduce its significant reliance. The review was just a first step in a long process.
Before this report was released, Taiwan’s semiconductor industry received much attention from Western media due to an ongoing chip shortage for automobiles. The shortage has resulted in the loss of billions of dollars in the auto industry. That chip shortage is slowly dissipating, but Taiwan’s water shortage in the spring also alerted the world again to its reliance on Taiwan-made chips.
A comment in the supply chain review notes: “A typical semiconductor production facility uses two to five million gallons of water per day.” TSMC estimates that it uses 156,000 tonnes of water a day.
That is a lot of water for a country that implemented strict water rationing to mitigate the effects of its shortage. TSMC is researching new technologies to recycle up to 40 percent of its water to reduce its water usage.
These two issues gave Taiwan some unwanted attention, because while the country was living through the water shortage, everyone outside of Taiwan was wondering what was going to happen to TSMC.
The coverage was overwhelming and came off as tone-deaf since it implied that people outside of Taiwan cared more about semiconductor chips than the plight of Taiwanese who did not have water.
Beyond Taiwan’s domestic water problems — not to mention its ongoing issues with power generation (another thing that semiconductor manufacturing requires heavily) and the community spread of COVID-19 — the US Department of Commerce, which authored the chapter on semiconductors, notes the semiconductor industry’s vulnerability to a natural disaster or “geopolitical event.”
“Even a minor conflict or embargo could have immediate major disruptions to the US and long-term implications for US supply chain resilience,” the report says
Interestingly, that statement is as specific as the review gets on this important issue. For a report that delves into the intricacies of how semiconductors are made, it is disappointing to read a minimal statement on perhaps the most important contingency for not just the supply chain of semiconductors, but also regional and global security.
The report explains how China is seeking to develop its own domestic industries and the threat that could pose to US national security. It could have spent a little more space discussing how an embargo or blockade, and the subsequent disruptions to global transportation routes, would have on the industry. It could have also outlined how even a minor conflict would affect the supply of semiconductors.
Considering that the world relies on Taiwan for 92 percent of leading-edge chips, the report should have more seriously and more thoroughly discussed the Chinese military threat to Taiwan, and the full spectrum of conflict options.
The review cites a Semiconductor Industry Association (SIA) report which said that a one-year, complete disruption of Taiwanese semiconductors would result in the loss of US$42 billion in revenue for Taiwanese companies and up to US$500 billion in losses for electronic device manufacturers around the globe.
It also notes that it would take three years and US$350 billion to replace Taiwanese foundries. The SIA’s doomsday scenario is sobering and further amplifies the importance of conflict mitigation in the Taiwan Strait.
It is no exaggeration to say that a war over Taiwan would have significant global economic impacts. When you add into the equation the complete elimination of Taiwan’s semiconductor manufacturing output, the situation becomes even worse.
When Western analysts and media discuss this possibility, it is never made obvious to the average person how much their lives could be affected by such a conflict. If the automobile chip shortage is shuttering factories in the US, then a complete industry shutdown would devastate US companies reliant on every sort of chip manufactured in Taiwan.
Discussions of a conflict over Taiwan need to draw a more clear and direct line to US economic security. People have varying opinions about the defense of Taiwan, but many Americans might change their minds if they understood how much of US life, jobs and security depend on the continued production of chips that are manufactured in Taiwan.
This connection should align well with the Biden administration’s “foreign policy for the middle class.”
The semiconductor chapter discusses strategies for how the US can reduce its supply chain vulnerability by fostering greater investment in the construction of semiconductor fabrication plants in the US homeland by foreign and domestic companies; continuing to foster research and development in the US; making the US a better competitor to retain its limited talent pool; and improving international cooperation and engagement with Taiwan, South Korea and Japan to level the playing field.
All of these strategies would benefit the US in the long-term goal of securing critical supply chains. News about TSMC’s possible consideration of building an advanced packaging plant in the US fits in well with the report’s recommendations.
However, these goals are long term — they require time and billions of dollars to achieve success.
Given the consistent Chinese military threat against Taiwan, and considering that China conducted its largest-ever incursion into Taiwan’s air defense identification zone on Tuesday last week, the greatest policy that the Biden administration can enact to secure the semiconductor supply chain is to ensure the continued security of Taiwan.
The 100-day supply chain review makes it clear that the US runs on semiconductors that are manufactured in Taiwan. Only Taiwan’s security can keep that supply chain secure.
Thomas Shattuck is a research fellow in the Asia Program at the Foreign Policy Research Institute. He is also a member of Foreign Policy for America’s NextGen Foreign Policy Initiative and the Pacific Forum’s Young Leaders Program.
Concerns that the US might abandon Taiwan are often overstated. While US President Donald Trump’s handling of Ukraine raised unease in Taiwan, it is crucial to recognize that Taiwan is not Ukraine. Under Trump, the US views Ukraine largely as a European problem, whereas the Indo-Pacific region remains its primary geopolitical focus. Taipei holds immense strategic value for Washington and is unlikely to be treated as a bargaining chip in US-China relations. Trump’s vision of “making America great again” would be directly undermined by any move to abandon Taiwan. Despite the rhetoric of “America First,” the Trump administration understands the necessity of
US President Donald Trump’s challenge to domestic American economic-political priorities, and abroad to the global balance of power, are not a threat to the security of Taiwan. Trump’s success can go far to contain the real threat — the Chinese Communist Party’s (CCP) surge to hegemony — while offering expanded defensive opportunities for Taiwan. In a stunning affirmation of the CCP policy of “forceful reunification,” an obscene euphemism for the invasion of Taiwan and the destruction of its democracy, on March 13, 2024, the People’s Liberation Army’s (PLA) used Chinese social media platforms to show the first-time linkage of three new
If you had a vision of the future where China did not dominate the global car industry, you can kiss those dreams goodbye. That is because US President Donald Trump’s promised 25 percent tariff on auto imports takes an ax to the only bits of the emerging electric vehicle (EV) supply chain that are not already dominated by Beijing. The biggest losers when the levies take effect this week would be Japan and South Korea. They account for one-third of the cars imported into the US, and as much as two-thirds of those imported from outside North America. (Mexico and Canada, while
I have heard people equate the government’s stance on resisting forced unification with China or the conditional reinstatement of the military court system with the rise of the Nazis before World War II. The comparison is absurd. There is no meaningful parallel between the government and Nazi Germany, nor does such a mindset exist within the general public in Taiwan. It is important to remember that the German public bore some responsibility for the horrors of the Holocaust. Post-World War II Germany’s transitional justice efforts were rooted in a national reckoning and introspection. Many Jews were sent to concentration camps not
RSS