Ensuring a stronger partnership in the technology supply chain between the United States and Taiwan

In the wake of the Russian invasion of Ukraine, the world became more ideologically polarized. As the war and Russian atrocities continue, the United States and its allies target Moscow with a series of sanctions on finance, technology, and trade. While there are concerns that such sanctions could strain global supply chains, it is necessary to take action to support democracy and the rules-based international order.

Taiwanese semiconductor manufacturers, including Taiwan Semiconductor Manufacturing Corporation (TSMC), have also cooperated with US sanctions and embargoes. Although Russia accounts for an insignificant volume of semiconductor import and export, the potential long-term negative effects still capture our attention. Two are noteworthy – first, China is becoming an agent partner for Russian imports and exports. China’s position on sanctions against Russia remains ambiguous so far, and it is not clear whether Beijing will establish closer economic relations with Moscow. Secondly, the possibility of Moscow’s economic retaliation against Taiwanese companies operating in Russia after Taiwan was included in the list of “unfriendly” countries by Russia.

One thing is for sure – given the centrality of the semiconductor industry to global supply chains, it will not be completely isolated from great power competition. Given the geopolitical tension between the United States and China, how should Taiwan work with the United States to stay resilient and avoid falling into the entanglement of two great powers? How can Taiwan integrate its supply chains with the United States while maintaining its inherent strength? Policy decisions in the United States and Taiwan in the coming years will play a critical role in determining whether both sides can meet the challenge, including by developing a pipeline of engineering talent, ensuring adequate resources to support technological progress, and stimulating mutual benefit. Collaboration to support deepening integration of value chains in the United States and Taiwan.

Meet the demand for chips and talents

For now, all eyes are on TSMC’s efforts to open a new 5-nanometer chip plant in Arizona, as the White House warns of mounting vulnerabilities from chip shortages that have disrupted production in the US auto and electronics industries. To meet future demand for semiconductor chips, the US Congress is pushing for favorable legislation and policy to bring back the chip industry subsidy back to US soil by injecting large sums of funding — an estimate of $50 billion in federal funding encapsulated in creating beneficial incentives for semiconductor production to act USA. However, it is unclear whether this push will be successful. The chances of success lie in vertical and horizontal integration.

Taiwan’s chip industry ecosystem occupies the top of the world due to the long-standing support from the Taiwan government’s leadership, group influence, candid engineering innovation, advanced technology development, close attention to fine detail, and significant investment in research and development (R&D). Two important factors must be taken into account for the success of technological cooperation between the United States and Taiwan. The first is talent development and retention. In the 1970s, the Taiwan government successfully recruited talented managers and engineers with Ph.D. Degrees such as Morris Chang (TSMC), Minn Wu (Macronix) and Nicky Lu (Etron) to return to Taiwan to stimulate the semiconductor industry. Since then, the world has seen a boom in semiconductors and applications stretching from Silicon Valley to Asia.

However, the industry anticipates a significant global shortage of engineering talent from upstream to downstream. How do we ensure that the talent pipeline continues to produce the necessary number of engineers and managers? Although top US universities continue to attract the world’s top talent to study in the US, very few US universities choose a career path in the semiconductor industry. Taiwan faces the same issue. Not only has there been a decrease in the number of students pursuing advanced degrees abroad, but there has also been a significant decrease in STEM education in general.

This gap in the talent pipeline must be taken seriously. Federal funding should be allocated to create training programs and scholarships to attract more students to study in this field. Exchange programs, on-the-job training, and research projects should be established between the United States and Taiwan. To address this issue, the Taiwan government launched the Taiwan Semiconductor Research Institute (TSRI) in January 2019. The institute should collaborate with the American Semiconductor Academy Initiative (ASA), a national collaborative education network for faculty in universities and colleges across the globe. throughout the United States who are engaged in research and education on semiconductors, to provide comprehensive training and in-depth research and development programs.

While the US government puts a significant amount of resources into expanding semiconductor manufacturing capacity, there are other elements in the semiconductor ecosystem, and comprehensive integration must be applied to build long-term sustainability of US-Taiwan cooperation. Taiwan, Japan, South Korea, and China account for nearly four-fifths of global manufacturing capacity. More than 90% of the advanced chips under 10nm are made in Taiwan. Almost the entire packaging sector in China and Taiwan. In addition to TSMC, the world’s leading chip maker, companies such as MediaTEK, ASE Group, Etron and Macronix contribute to the overall success of this ecosystem. The semiconductor competition is a long game. The integration should not only be in semiconductor manufacturing, but also in integrated circuit (IC) design, advanced packaging and testing, and other related upstream and downstream industries.

The long-awaited CHIPS Act boasts a significant amount of federal funding, with most of the funding used to build chip factories. However, more robust policies should be put in place, such as tax credits, immigration programs, STEM education subsidies, and investment incentives.

Supply Chains and Geopolitics

As global geopolitics becomes more polarized, nations are divided not only by the interests they pursue, but also by the values ​​they represent. Taiwan’s role in global supply chains will become even more important. As the US continues to ramp up efforts to rebuild the chip industry and secure semiconductors, big questions loom for US-China and Taiwan relations. How will US efforts to improve the semiconductor industry affect Taiwan and cross-Strait relations? How can the United States and its allies protect themselves from China creating new vulnerabilities in the semiconductor industry?

Taiwan’s semiconductor industry must engage with and contribute to US solutions to enhance regional security and ensure economic competitiveness. This integration should create an all-encompassing partnership rather than involving dominant control. It is in the interest of the United States to continue to support Taiwan in its efforts for self-defense and economic resilience. This can be achieved by expanding US industrial policy that supports “leading” industries and sectors with tax policy and subsidies and by increasing spending on research and development. It would be wise to rethink the antitrust approach in this sector so that semiconductor companies can achieve the scale needed to support research and development and competitiveness. A comprehensive plan must be implemented to ensure access to the rare earth metals needed to manufacture semiconductors, especially as China still dominates the world’s supply. Moreover, now is the perfect time for the United States to speed up bilateral trade agreement talks with Taiwan.

This cooperation will emphasize flexibility, robustness, and effectiveness in protecting technological intellectual property, enhancing manufacturing capacity, investing in workforce development and upgrading, improving coordination for global supply chain management, cross-sectoral investment, and overall integration. Better and deeper economic integration with the United States and an emphasis on upholding Taiwan’s ability to defend itself is essential.

A stronger US-Taiwan partnership in the technology supply chain would benefit both the US and Taiwan as well as allies with shared democratic values. The success of such a partnership depends on trust, accountability, and continued policy clarity. While significant funding, favorable legislation and strong political will are essential, training and retention of talent pipelines, research and development collaborations, and comprehensive industrial integration are all vital to this success. Technology must be the vehicle for regional stability and economic sustainability, endless.

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