US president-elect Donald Trump earlier this year accused Taiwan Semiconductor Manufacturing Co (TSMC) of “stealing” the US chip business. He did so to have a favorable bargaining chip in negotiations with Taiwan.
During his first term from 2017 to 2021, Trump demanded that European allies increase their military budgets — especially Germany, where US troops are stationed — and that Japan and South Korea share more of the costs for stationing US troops in their countries. He demanded that rich countries not simply enjoy the “protection” the US has provided since the end of World War II, while being stingy with spending money to protect themselves.
Taiwan is also expected to gradually increase its national defense budget to demonstrate its determination in self-defense, but this would inevitably crowd out other essentials for people’s lives domestically. The Executive Yuan, and the ruling and opposition camps would need to find a balance between the two through the democratic mechanism. Take for example the central government’s annual budget for fiscal year 2025: The national defense budget is to account for 2.45 percent of GDP, higher than the 2.38 percent in fiscal year 2024. While South Korea’s figure of 2.8 percent serves as a reference, Israel’s 5.2 percent cannot apply to Taiwan.
Taiwan’s real bargaining chip is TSMC. With its high-end chips and advanced packaging technology, it is far ahead of Samsung or Intel. TSMC has also set up factories in Arizona in the US and Kumamoto Prefecture in Japan, and they are gradually seeing results. TSMC would have advanced chip-on-wafer-on-substrate (CoWoS) packaging factories in both countries, so after the completion of the end chips, they would not need to be brought back to Taiwan for packaging.
The world’s semiconductor production is highly concentrated in Taiwan, as about 90 percent of high-end chips and nearly 100 percent of advanced CoWoS packaging are produced by the country. This has caused a “national security risk” for the US, Japan, Europe and other Western countries. From the new generation of fighter jets, missiles, satellites, graphics processing units for artificial intelligence and smartphones to self-driving vehicles, they all rely on advanced chips. Once an emergency really occurs in the Taiwan Strait, the Western world would be close to a shutdown.
By setting up high-end chip factories in the US and Japan, Taiwan can effectively diversify risk, assuring the world that a Taiwan emergency would not result in a shortage of the high-end chips the West badly needs.
As for the country filled with “ambition” for Taiwan, it might think twice, as it would no longer be able to achieve its goal of threatening Western countries by seizing Taiwan.
After joining the Western alliance for democracy and freedom, Taiwan and all member states should work with collective wisdom and efforts to play their roles and complement one another, while striking a balance between their own interests and the interests of the alliance.
Richard Wu is a trade promotion organization retiree.
Translated by Eddy Chang
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