As Trump 2.0 looms, Taiwan’s chip industry prepares for upheaval | technology

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Taipei, Taiwan – With only a few weeks left in office, outgoing US President Joe Biden and his team are scrambling to secure billions of dollars in funding to bring chip production back to the US.

Signed signed into law by Biden in 2022The CHIPS and Science Act provided $280 billion in funding to boost U.S. domestic semiconductor research and production, including $39 billion in grants, loans, and tax credits to U.S. and foreign companies.

The legislation received bipartisan support in Congress and was widely welcomed in both Democratic and Republican-leaning states that wanted to attract state-of-the-art manufacturing facilities and create jobs.

But with President-elect Donald Trump set to take office on January 20, the future of the CHIPS Act now appears uncertain, leaving Biden’s administration busy finalizing complex negotiations with chipmakers and distributing funds.

During an appearance on the Joe Rogan Experience podcast shortly before the election, Trump called the legislation “so bad.”

“We have spent billions of dollars on rich corporations,” Trump said.

Trump has also accused places like Taiwan, home of the world’s largest high-power semiconductor maker, Taiwan Semiconductor Manufacturing Company (TSMC), of “stealing” the chip industry from the United States.

Most of the 24 recipients of CHIPS Act money are U.S. companies, led by Intel, which received nearly $7.9 billion in direct funding from the U.S. Department of Commerce last month.

Four East Asian companies have also signed the CHIPS law: TSMC and GlobalWafers from Taiwan and Samsung and SK Hynix from South Korea.

In recent weeks, the Commerce Department finalized its contracts with TSMC and GlobalWafers after previously signing non-binding agreements.

TSMC secured $6.6 billion in grants and $5 billion in loans to build four facilities in Arizona, while GlobalWafers secured a contract to receive $406 million to build plants in Missouri and Texas.

Trump cannot unilaterally repeal the CHIPS law because it was passed by the US Congress, but analysts say he could make it harder for the law to work as intended.

As president, he could block or delay the Commerce Department’s distribution of funds, perhaps as part of cost-cutting efforts led by the new so-called Department of Government Efficiency led by tech mogul Elon Musk and entrepreneur Vivek Ramaswamy.

Biden
U.S. President Joe Biden speaks about his economic agenda after touring the site of a planned TSMC facility in Phoenix, Arizona, on December 6, 2022 (Patrick Semansky/AP)

Dan Hutcheson, vice chairman of California-based Tech Insights, said Trump could also simply try to renegotiate some provisions of the CHIPS Act or convert elements of it into new law.

Trump carried out a similar maneuver in 2018 when he signed the agreement Agreement between the USA, Mexico and Canada It is intended to replace the essentially similar North American Free Trade Agreement, Hutcheson said.

The Trump administration drew heavily on the language of NAFTA and the Trans-Pacific Partnership, a free trade agreement with Asia proposed by former President Barack Obama, for the revised agreement.

“What (Trump) really wants is to put his brand on everything… and you see that in all his hotels and resorts and everything else,” Hutcheson told Al Jazeera.

“It’s his typical approach that I think you can expect with the CHIPS Act.”

Among the CHIPS Act’s Asian partners, Taiwan’s TSMC has made the most visible efforts to boost U.S. investment.

After previously signing a non-binding memorandum of agreement, the Taiwanese company last month secured $6.6 billion in grants and $5 billion in loans to build four semiconductor factories in Arizona.

According to Chim Lee, a senior analyst for China and Asia at the Economist Intelligence Unit, other Asian companies have responded less quickly because of the delays of the last two years and their own business challenges.

In April, Samsung signed a non-binding $45 billion deal to expand its manufacturing facilities in Texas in return for $6.4 billion in grants.

Eight months later, no progress on the agreement has been announced.

In October, the South Korean tech giant issued a rare public apology after reporting disappointing third-quarter results, citing competition from its Chinese rivals.

There were also no further updates on the status of non-binding agreements announced in April and July, respectively, for SK Hynix to build a $3.87 billion plant in Indiana and GlobalWafers to invest $4 billion in silicon wafer production in Texas and Missouri should invest.

Yachi Chiang, a technology law professor at National Taiwan Ocean University, said many people in Taiwan believe the Trump administration will ask TSMC to invest more than the $65 billion it has agreed to in exchange for U.S. subsidies promised to build three plants in Arizona.

With the change in government, companies may be less interested in extending negotiations further, said the EIU’s Lee.

“Renegotiation may extend the distribution of funds, if not undermine some of it. The allocation (of funds) has already taken more than two years since the bill was passed. Companies don’t like waiting and they don’t like uncertainty,” he told Al Jazeera.

“Of course it goes both ways. For some companies, manufacturing in the U.S. is so costly that they won’t commit to investing unless there are strong incentives.”

Lai Ching-te
Taiwanese President William Lai Ching-te waves to the crowd on National Day, October 10, 2024 (Ann Wang/Reuters)

Asia’s tech companies have other incentives to keep production closer to home.

South Korea and Taiwan passed their own equivalents of the CHIPS law last year to increase subsidies and tax breaks for companies investing locally.

Japan approved $3.9 billion in subsidies for domestic chipmaker Rapidus earlier this year, and Tokyo plans to spend up to $65 billion in public and private sector funds to catch up with its chip neighbors.

Meanwhile, China recently pledged $45 billion to shore up its chip industry in the face of U.S. export controls and other attempts to curb purchases of advanced technology.

Taiwan’s Ministry of Economic Affairs told Al Jazeera that it would not be appropriate to comment on the CHIPS law before Trump takes office.

However, Taipei has signaled to Trump that it is listening to his concerns.

Shortly after Trump’s election victory, the Financial Times reported that Taiwan was considering a $15 billion arms purchase deal to show the president-elect it was “serious” about its defense after he criticized the country for spending more should spend on its military.

At the same time, there is political gridlock across East Asia, creating further uncertainty about how governments will respond to the Trump administration and its economic demands.

While Taiwanese President William Lai Ching-te can work with Trump as head of state, he is constrained domestically by an opposition that has a majority in the legislature.

In South Korea, Han Duck-soo is serving as acting leader as the country’s Constitutional Court considers whether to remove Yoon Suk-yeol from office following his impeachment over a short-lived declaration of martial law.

In Japan, Prime Minister Shigeru Ishiba leads a minority government after his Liberal Democratic Party lost its majority in parliament following a snap election in October.

A second election is scheduled for Japan’s upper house of parliament next year, pointing to further uncertainty.

William Reinsch, senior adviser to the economic program at the Center for Strategic and International Studies, said the CHIPS law is just one of many issues on the minds of East Asian leaders.

“I would expect Korea, Taiwan and Japan to look at the bigger picture of how best to maintain good relations with the US rather than just focusing on the CHIPS law,” Reinsch told Al Jazeera.

“They should be expected to think seriously about investing more in the U.S., spending more money in their own defense budgets, and thinking about how best to adapt to U.S. policy toward China.”



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