US economy would be devastated if China seizes TSMC, Commerce Secretary says

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TSMC is a company that could send the world into disarray if China were to take its control, and the US is very concerned about it. During a recent House hearing, the US Commerce Secretary Gina Raimondo said that such an event would be “absolutely devastating” for the American economy. That’s because of its overreliance on the Taiwanese semiconductor company. The US buys “92% of its leading edge chips from TSMC,” Raimondo revealed.

China seizing TSMC would be devastating for the US economy

With a market share of over 60%, TSMC is the world’s largest semiconductor foundry by a huge margin (the second-biggest foundry is Samsung with a market share of about 10%). The Taiwanese firm manufactures semiconductor chips for many leading global tech companies, including American giants like Qualcomm, Apple, AMD, Intel, and NVIDIA. TSMC supplies pretty much the entire demand for advanced semiconductors in the US.

This overreliance on the Taiwanese company could put the US economy in trouble should China invade Taiwan and take control of TSMC. The geopolitical tensions between the world’s top two largest economies are well-known to everyone. The US government paralyzed China’s then largest tech company Huawei by placing it on the Entity List in 2019. It is also mulling a nationwide ban on popular social media app TikTok. China would be itching for revenge.

Raimondo declined to comment on the likelihood of such an invasion from China. However, she made it clear that the US would find itself in a dire situation if it were to happen. Unfortunately, it doesn’t have a choice. Apart from TSMC, Samsung is the only other foundry that is currently mass-producing the most advanced 3nm chips. The Korean firm’s production capacity may be too low to handle the US demand if it loses access to TSMC’s foundry.

TSMC recently received over $11 billion from the US government

The US government is putting in efforts to boost the domestic semiconductor industry. It has announced tens of billions of dollars in grants and incentives for several chip companies to expand their production in the country. TSMC has pledged to build a third chip fabrication plant in Arizona by 2030, increasing its investment from $40 billion to $65 billion. In return, it received a grant of $6.6 billion and up to $5 billion in low-cost government loans.

Samsung will also receive up to $6.4 billion in grants for its chip investments in the US. The Korean firm is currently constructing its second chip factory in the country and plans to add a third one in the coming years. It will also set up a semiconductor R&D (research and development) center in the US. All of these plans would take time to materialize. Until then, the US would be hoping that China stays away from TSMC.

In 2023, a US government paper estimated a 59% increase in the US price of logic chips in the event of a major manufacturing disruption in Taiwan. Interestingly, a few years ago, an American security publication said that if China seizes TSMC, the US military will destroy the firm’s Taiwan-based factories to keep its advanced equipment out of China’s hands. Taiwan, on the other hand, has vowed to protect TSMC’s fabs from a US attack in the event of a war with China.

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