A new $12 billion US chip plant sounds like a win for Trump. Not quite.
On Friday, May 15, the Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker, announced that it will build a $12 billion plant in Arizona, to open by 2024. It expects the facility to employ roughly 1,600 people and indirectly generate thousands of other jobs.
At first blush, the announcement looks like a victory for the Trump administration, which has been pushing to disentangle its technology supply chain from China—both by regaining its high-tech manufacturing capacity from Asia and by cutting off its own equipment and intellectual property from Chinese tech giants like Huawei. But the impact of the TSMC deal is far from clear cut and instead highlights just how intertwined the countries’ supply chains really are.
TSMC is one of only three manufacturers in the world that produce the most advanced computing chips—those containing transistors 10 nanometers or smaller. The other two are South Korea–based Samsung Electronics and US-based Intel, which mostly reserves its advanced chips for its own products. For comparison, China’s largest domestic chipmaker, Semiconductor Manufacturing International Corp. (SMIC), can’t produce anything smaller than 14-nanometer chips. Because of this, TSMC has increasingly found itself at the center of US-Chinese competition for technological dominance.
Among TSMC’s largest customers are both Apple and Huawei, which the US Department of Commerce placed on its so-called entity list last year. Huawei’s inclusion on the list, along with 114 of its related affiliates, banned US companies from selling their technology to those firms without a special license. The department said the decision was made on the grounds of national security. It’s no coincidence that Huawei also plays a critical role in China’s technological development and expansion overseas, especially with the country’s AI and 5G strategies.
台积电最大的客户是苹果和华为这两家科技巨头，后者在去年被美国商务部列入了其所谓的实体清单之列。由于此举，在没有特殊许可证的情况下，美国公司都被禁止向华为及与其相关的114家附属机构出售技术。商务部称，这项决策是出于对国内的安全考量的基础之上作出的。并非巧合的是，华为同样在中国的科技进步以及海外扩张当中扮演了关键性的角色，尤其是在中国的AI 和 5G战略布局层面。
But the initial blacklist didn’t affect TSMC because it is not a US company. This offered Huawei a loophole to continue accessing the cutting-edge chips used to power its smartphones, AI projects, and 5G networks. On May 15, hours after TSMC’s plant announcement, the Department of Commerce sought to tighten that loophole by updating its export rules. Under the expanded regulations, any non-American chip producers that use American chipmaking equipment must also obtain a special license in order to sell to Huawei. Because the US is one of only a handful of countries dominating the design and production of such high-precision manufacturing equipment, which can often cost north of $100 million per machine, the rules thus bind TSMC as well as other advanced chipmakers that would be hard pressed to find alternatives. This effectively places Huawei’s supply of chips under the US Commerce Department’s control. As of May 18, TSMC had already stopped accepting Huawei’s orders, according to Nikkei Asian Review.
但这最初的黑名单并没有对台机电产生影响，因为它不是一家美国公司。这给华为提供了一个空档，使其可以继续购买最先进的芯片，用以赋能其生产的智能手机，AI 项目 以及 5G 网络。在5月15日当天，台积电宣布将在美国设厂的数小时后，美国商务部就扩大了其出口方面的禁令，以堵住这个空档。新的出口规定之下，任何非美国公司只要使用了美国的芯片生产设备，就都需要获得特殊许可，才能向华为出售自己的产品。高精度芯片的生产设备的造假动辄上亿美元，而美国是垄断了这种设备的设计和制造的少数几个国家之一。因此，新的规定就遏制住了包括台积电在内的一众芯片厂商向华为销售产品的商业行为，华为也很难找到不在限制范围内的其他供应商。这些措施将华为的芯片供应牢固地掌控在了美国商务部的手里。根据日经亚洲周刊的报道，就在5月18日，台积电已经停止了接纳来自华为的订单。
“Semiconductor equipment is the weak link in China’s supply chain that America is really zooming in on,” says Neil Thomas, a senior research associate at the think tank Macro Polo, who studies US-China relations and the semiconductor supply chain. “Huawei can design state-of-the-art chips, just as good as perhaps chips that Apple can design. But what China can’t do is actually build those chips.”
Within this context, the planned plant takes on additional meaning. On Monday, the blow intended for Huawei inadvertently struck TSMC, which saw its stock price slip by 2.5% along with other Huawei suppliers. Some analysts now foresee the US Commerce Department granting it a license to continue selling to Huawei anyway, in order to keep the company on good terms to carry out its $12 billion deal. Whether TSMC made its announcement with knowledge of the upcoming change to the export ban is unclear, but Reuters reported that the decision to locate the plant in the US has already generated “good will” within the department all the same.
The plant will do little to affect US reliance on Asia-based manufacturing. It is slated to produce 20,000 wafers a month once it opens—only a small fraction of the 12 million wafers that TSMC made last year alone. And by the time the plant opens, the 5-nanometer chips that it is designed to produce will no longer be the most cutting-edge chips available. The company already has plans to move to 3-nanometer chips and smaller in its Taiwan-based plants during the next few years. Given the capital costs and time it would take to transition the Arizona plant to the latest technology, this means the US would still need to maintain its supply of chips from overseas plants to access the newest advancements.
In other words, the plant will do nothing to disentangle the two countries’ supply chains from each other. “It’s probably too small to really have any huge impact on the global picture,” Thomas says.
If the expanded export ban did in fact hold, it could also introduce unintended consequences. China accounts for a lion’s share of the revenue for a number of American semiconductor companies, such as Qualcomm, which relies on the country for two-thirds of its income. In the long term, the lost sales to Huawei and potentially the broader Chinese market could slow US innovation in chipmaking. “Capital expenditure and research and development are really high in the semiconductor industry—about 30% of total revenue,” Thomas says.
In recent years, the trade war has spurred China to double down on investing in its semiconductor industry. On the same day as the US government’s updated export ban, the Chinese government announced a $2.2 billion injection into its largest domestic chipmaker, SMIC. The country’s hope is that Chinese chipmakers will catch up to the state of the art within a few years and complete its domestic supply chain for cutting-edge computing hardware. In the interim, Huawei would rely on the TSMC chips that it has been stockpiling for a year, in anticipation of further US restrictions.
Thomas says there are still a lot of unknowns as to how this will shake out. “The uncertainty is to what extent China can innovate itself out of this dilemma,” he says.
Either way, TSMC’s Arizona plant isn’t so much a signal of the Trump administration’s success in reshoring high-tech manufacturing. Instead, its presence highlights a complicated network of relationships that may eventually be severed on China’s terms rather than the US’s.
The US is taking a “gamble,” Thomas says.