US warns loss of Taiwanese chips could shatter economy

Taiwan controls most of the world’s chipmaking capacity, which worries US Commerce Secretary Gina Raimondo.

Raimondo believes the US would enter a ‘deep and immediate recession’ and face great security risks if it lost access to the island nation’s chips

The Commerce Secretary issued the warning in an interview with CNBC on Wednesday as part of her plea for Congress to help a major expansion of U.S. semiconductor manufacturing by passing the Incentives Creation Act. Useful in Semiconductor Production (CHIPS), which would unlock $52 billion in grants for new plants and research efforts.

“If you allow yourself to think of a scenario where the United States no longer has access to chips that are currently made in Taiwan, that’s a scary scenario,” Raimondo told CNBC. “It’s a deep and immediate recession. It’s an inability to protect ourselves by making military equipment. We have to do that in America.”

The problem is that Taiwan faces continued aggression from China, which claims the self-governing island nation as its own and has not ruled out using military force to “reunite” the two. This has raised fears that China could invade Taiwan and take over its manufacturing plants, which are run, among other chipmakers, by three of the world’s largest contract chipmakers – its factories are not deliberately destroyed first.

This scenario would mean big problems for the United States, as Taiwan produces 90% of the advanced chips the country buys, according to Raimondo.

She is likely referring to TSMC, which Reuters says controls 90% of global production of such chips, citing industry estimates. This includes chips made by companies like Apple, Nvidia, AMD, and Qualcomm, and they’re used in everyday devices like smartphones, PCs, and servers. And then there’s the whole issue of military kit.

These concerns about Taiwan’s security and independence are why Raimondo thinks it’s important for the United States to rebuild its semiconductor manufacturing base through the CHIPS Act.

“We need a manufacturing base that produces these chips, at least enough of these chips, right here on our shores, because otherwise we’ll be too dependent on other countries,” she said.

Even if the CHIPS Act passes, which is progressing after the Senate voted on Tuesday to advance the legislation, it will be years before new manufacturing plants in the United States start producing chips.

Intel, for example, doesn’t expect its new factories in Ohio to start production until 2025. The company is also building two new factories in Arizona, and those are expected to come online in 2024. is when TSMC and Samsung also plan to open new fabs in Texas and Arizona, respectively.

While the new factories will increase chipmaking capacity in the United States, research firm TrendForce believes they won’t do much harm to Taiwan’s industry dominance in the near term. By 2025, the company said, Taiwanese chipmakers will still hold 44% of the global foundry market, 47% of 12-inch wafer capacity and 58% of advanced manufacturing process capacity. ®

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