- Slug: Trump Chips Taiwan. 1,090 words.
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By Phineas Hogan
Cronkite News
WASHINGTON – The federal government promised billions to a Taiwanese semiconductor giant to bring thousands of high-paying jobs to Phoenix. Former President Donald Trump is critical of the funding, and if elected, he could claw back the subsidies – putting those jobs at risk.
“Taiwan took our chip business,” he said in a June interview that roiled the stock price of Taiwan Semiconductor Manufacturing Company, arguing that Taiwan is “immensely wealthy” and the U.S. shouldn’t be “giving them billions of dollars to build chips.”
“Taiwan doesn’t give us anything,” he said. “How stupid are we?”
In April, the Biden administration pledged $6.6 billion in grants and up to $5 billion in loans to help TSMC – one of the world’s largest companies – build three chip factories in Phoenix.
Trump has not explicitly promised to renege. But his comments to Bloomberg Businessweek rattled semiconductor investors. Taiwanese officials have gone out of their way to refute his assertions.
“Taiwan did not steal the U.S. chip industry. This is a misunderstanding on Trump’s part,” Economy Minister Kuo Jyh-huei said last month.
TSMC’s fabrication facilities, or fabs, are projected to create about 6,000 high-paying jobs in Phoenix, plus tens of thousands of temporary construction jobs. The company touts its $65 billion commitment as the largest foreign investment in Arizona history.
The federal subsidies come from Biden’s crowning manufacturing policy: the Creating Helpful Incentives to Produce Semiconductors and Science Act, commonly known as the CHIPS Act.
Signed into law in August 2022, the bipartisan legislation set aside $52.7 billion for chip research, manufacturing and workforce development in the United States.
Semiconductors, which were invented in the U.S., are key components of microchips used in a huge variety of devices, from cellphones and fighter jets to cars and toasters.
TSMC makes chips for leading technology and artificial intelligence developers, including Apple, NVIDIA and AMDl.
“When the pandemic shut down chip factories overseas, the prices of everything went up,” Biden said during a March visit to an Intel facility in Chandler, where he announced an $8.5 billion CHIPS Act infusion for that company.
“My CHIPS and Science Act led to partnerships with companies investing billions and billions of dollars across the country, bringing semiconductor manufacturing back to America,” he said.
CHIPS Act funds aren’t disbursed up front. The company must fulfill certain construction, production and other requirements first.
So it’s possible TSMC won’t get the $6.6 billion promised by the Biden administration – if Trump wins a second term and his commerce secretary scraps the deal.
The law allows for that, with a finding that the recipient contributes to a “technology or product that raises national security concerns.”
“If there is still money to be allocated, Trump can decide to not give the money out,” said David Sacks, a U.S.-Taiwan relations expert at the Council on Foreign Relations.
TSMC’s investments in Arizona pre-date the CHIPS Act. The company announced its first Phoenix fab in May 2020, when Trump was president.
But the company says the subsidies allowed it to increase investments in the state.
The company announced plans for a second fab in December 2022, with production planned to start in 2026. TSMC has since moved that target to 2028. Last January, the soon-to-depart Chairman Mark Liu said construction would be delayed pending review of “how much incentives … the U.S. government can provide.”
Negotiations were underway at that time. In April, TSMC began wafer production at the first fab and announced plans for a third fab under a deal struck with the Biden administration for CHIPS Act funding.
On Thursday, the current CEO and chairman, C.C. Wei, told investors on a quarterly earnings call that production is still on track to start in 2028 at the second fab and by the end of the decade at the third.
“All our overseas decisions are based on our customers’ needs, as they value some geographic flexibility, and a necessary level of government support,” he told investors. “In Arizona, we have received the strong commitment and support from our U.S. customers and the U.S. federal, state and city governments, and have made significant progress in the past several months.”
Trump blames Democrats for U.S. dependence on foreign chipmakers – a reliance the CHIPS Act was intended to reduce.
Richard Stern, a federal budget expert at the conservative Heritage Foundation, said the sort of incentives provided by the CHIPS Act wouldn’t be needed if U.S. taxes and regulations didn’t discourage such investments.
He echoed Trump’s concerns about “an enormous amount of money from the CHIPS Act” going to a foreign chipmaker that, in his view, will ultimately use it to build production capacity in Taiwan.
CHIPS Act defenders say the investment will build a vital domestic supply chain, even if a foreign company owns the factories.
The commercial and security stakes are tightly related.
Taiwan relies heavily on U.S. military backing and arms sales. China views the island, which has been self-governing since 1949, as a breakaway province that it will eventually reabsorb, and has ramped up its military presence around Taiwan in recent years.
“Taiwan should pay us for defense,” Trump said in the June interview. “We’re no different than an insurance company.”
Sacks said such rhetoric reflects Trump’s transactional approach to foreign policy.
“It’s consistent with his overall worldview,” he said. “He believes that U.S. partners and allies take advantage of the United States and that they get more out of the relationship than we do.”
Biden approved a $567 million defense package for Taiwan on Sept. 29. That’s on top of $8 billion provided in April to Taiwan and others in the region to counter Chinese threats, part of a $95 billion package that included aid to Ukraine, Israel and other allies.
Semiconductors account for half of U.S. imports from Taiwan. The U.S. has a $51 billion trade deficit with Taiwan, meaning it buys far more than it sells there.
Trump despises trade deficits, Sacks noted, and the TSMC subsidies and defense aid could be used as leverage.
“I could see Trump trying to pressure Taiwan to bring that more into balance,” he said.
But Scott Nemeth, global studies expert at the McCain Institute, said Trump would lose support in Congress if he undermines the CHIPS Act, a popular, bipartisan policy.
“The way that the economy is in the United States right now – jobs, jobs, jobs is the message that you hear on the campaign trail,” he said. “Fracturing a relationship with Taiwan as it relates to semiconductors would have a negative economic impact.”
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