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Taiwanese Semiconductor Makers Expand US Production Amid China Tensions

Taiwan's chief trade representative announced plans to expand semiconductor production in the US, while emphasizing Taiwan's importance as a business hub for US companies, amid escalating tensions with China.

In a visit to Washington this week, Taiwan’s chief trade representative, John Chen-Chung Deng, announced that the country’s semiconductor makers plan to expand production in the US as much as possible. This announcement comes at a time of escalating tensions between Taiwan and China, as the US and Taiwan are seeking to bolster their militaries and economies against any potential threat from China.

Semiconductors are an essential component in a wide range of electronic devices, from phones to electric cars to advanced weapons. Taiwan currently produces over 90% of the world’s advanced semiconductors, making it a crucial hub for the global electronics industry.

President Joe Biden and Congress are currently moving to boost semiconductor production on US soil, as concerns grow that any conflict with China could disrupt exports from Asia, particularly from Taiwan. To this end, Taiwan Semiconductor Manufacturing Corp. is building a $40 billion chip plant in Arizona.

Despite these efforts, Deng emphasized that Taiwan remains an ideal place for semiconductor production, as well as for other US trade, business, and investment, due to its experienced workforce and support industries. He also highlighted the importance of avoiding exaggeration or rhetoric that could create unnecessary fear, and urged Americans to see these efforts as a means of discouraging any potential invasion by China.

Taiwan and China have had no official relations since they split in 1949 after a civil war, but are linked by billions of dollars in trade and investment. China regularly flies fighter planes and bombers near Taiwan to enforce its stance that the island is obliged to unite with the mainland, by force if necessary.

The Biden administration and both Democrats and Republicans in Congress are broadly supportive of efforts to strengthen the US and Taiwanese positions in the region, in order to discourage any potential Chinese invasion of Taiwan. This has also brought renewed focus from Washington on Taiwan’s long-standing appeals to the US to overhaul its tax and trade policies toward the island.

Without formal relations or a tax treaty with the US, Taiwanese workers in the US are currently required to pay taxes in both countries, making the US prohibitively expensive for many Taiwanese. Senior members of Congress have urged the US to reach a tax agreement with Taiwan.

Taiwanese officials are also hoping to close an initial trade agreement with the US in the coming weeks, which would be a significant step towards free-trade pacts like those the US has negotiated with other allies, such as South Korea. Deng argued that such an agreement would boost Taiwan’s confidence and encourage other allies to increase trade with Taiwan, helping it lessen its economic dependence on trade with China.

While China accuses the US of meddling in its internal affairs and pursuing a containment strategy against China, Taiwan sees the strategic importance of Biden administration measures aimed at discouraging other countries from exporting semiconductors to China, to starve China’s security forces of the advanced chips they need. Integrated circuits alone account for about 25% of Taiwan’s GDP, but Taiwan “realizes there’s no sense in sending chips to them, to build up missiles aiming at us,” Deng said.

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