The Impact of Taiwan's Semiconductor Industry on the Global Trade and Security
On September 27th, 2023, the Walker Institute of International and Area Studies and the Taipei Economic and Cultural Office (TECO) in Atlanta co-hosted the Taiwan Symposium to address one of the world's most pressing security and trade topics: semiconductors. Semiconductors are in all advanced and connected technology, including mobile communications, manufacturing, automobiles, and avionics.
Taiwan plays an integral role in the semiconductor industry, contributing 25% of semiconductors in the global economy and more than 90% of advanced and critical chips. With increasing demand for AI and mobile computing chips, Taiwan is strategically positioned as the leading producer of advanced chips. Taiwan's semiconductor ecosystem, dating back to the 1970s with the Industrial Technology Research Institute (ITRI), and TSRI's research platforms since 1988, underpins this. Actively promoting international collaboration for semiconductor technology development by 2030, initiatives like the Angstrom Semiconductor Initiative aim for energy-efficient silicon.
“The talent shortage is a global problem right now…we have to be able to work with universities to continue talent supply from academic to industry. Cooperation is very important in the future of semiconductors, and Taiwan is definitely open [to] more cooperation of opportunities with the US,” said Dr. Tuo-Hung (Alex) Hou, Director General of the Taiwan Semiconductor Research Institute (TSRI). Despite a 40% talent shortage in 2022, Taiwanese developers, especially in energy-efficient silicone, continue to innovate. Taiwan collaborates with the US in the NSTC-NSF program, funding six US-Taiwan teams for semiconductor advancements. Encouraged by recent US legislation, the major Taiwanese semiconductor maker, TSMC, is moving more of its fabrication to the United States.
The University of South Carolina, as a lead institution in the new regional tech hub, is looking to learn more about chip fabrication to boost the South Carolina economy. According to the South Carolina Department of Commerce, South Carolina is a leader in the US automotive sector, accounting for over $27 billion in economic impact since 1994. South Carolina now accounts for nearly one-third of the US market share in the production and export of tires.
Speaking at the symposium, South Carolina Secretary of Commerce Harry Lightsey shared the importance of semiconductors to the state of South Carolina, emphasizing that it "cannot be underestimated," as we have seen how the pandemic's supply chain disruptions have affected the automobile industry.
With ongoing tensions between the United States and China, trade between the two countries has become uncertain. Secretary of State Mark Hammond emphasized the importance of partnership between South Carolina and Taiwan, stating that it "is grounded in our mutual respect for democracy, human rights, and international cooperation."
The symposium featured four specialists to help us make sense of how semiconductors are an important part of the strategic relationship between Taiwan and the United States, as well as for global trade.
“Why do firms have to care about politics?” asked Dr. Andrew Spicer, an Associate Professor in the Sonoco Department of International Business at the Darla Moore School of Business, USC. It’s because of the intersection of politics and business, especially in the context of supply chain disruptions. The chokepoint, exemplified during the pandemic's semiconductor shortage, thus affecting car production, underscores the critical role of Taiwan’s expertise in semiconductors, leveraging comparative advantage and free trade. In response to semiconductor supply chain concerns, the US has introduced the CHIPS Act to incentivize companies to produce semiconductors domestically. Dr. Spicer later examined the geopolitical landscape, referencing the Chips and Science Act 2022, which allocates $50 billion for domestic semiconductor manufacturing.
Russell Hsiao, Executive Director of the Global Taiwan Institute, highlights the US-China strategic competition, emphasizing the concept that "economic security is national security." He discussed the People's Republic of China (PRC) leveraging tools to reshape the global order and pursue its global ambitions through geoeconomics, such as providing loans in initiatives like the Belt and Road. Chow suggested recommendations for strengthening the US and Taiwan relationship. These include finding innovative ways to adapt to supply chain disruptions, seizing a comprehensive bilateral trade agreement, addressing dependencies on the PRC market, creating a list of sanctions in case of military action against Taiwan, and implementing tax policies to attract more Taiwanese companies to the US.
Dr. Chris Miller, an Associate Professor at the Fletcher School of Global Affairs at Tufts University and author of Chip Wars, emphasized the deep relationship between Taiwan Semiconductor Manufacturing Company (TSMC) and the US. TSMC's crucial role in supplying semiconductors has strengthened ties with many US companies. While TSMC has diversified its base, it remains predominantly in Taiwan due to cost-related factors.
“Are we asking companies to take sides?” asked Dr. Spicer, questioning whether companies participating in the Act should limit their expansion in China due to national and economic security, technological advances, international business, and supply chain issues. “What would happen if there was a blockade in Taiwan?”
In attendance this year included staff members from South Carolina’s Congressional Delegation, representatives from the Taipei Economic and Cultural Office (TECO) in Atlanta as well as representatives and senators from the South Carolina State House. Watch the Event Video Here.