Former US President Donald Trump, in a Fox News interview, accused Taiwan of taking away American's semiconductor business and said the US government should have tariffed Taiwan, implying that trade barriers should be erected against Taiwan. The former President failed to acknowledge the fact that the Biden Administration has successfully invited Taiwan Semiconductor Manufacturing Co., Ltd to build chips in Arizona and bring its semiconductor supply chain partners along with it to invest in the US.
"Taiwan, they took our business away. We should have stopped them. We should have taxed them. We should have tariffed them," said Trump, when answering the host's question on the geopolitical risks of Taiwan being a target of China's aggression.
Trump's statement has already raised a few eyebrows in Taiwan, with major media outlets flashing the headline as a news alert this morning.
"Trump is completely ignorant about the semiconductor industry," said Jackson Hu, former chairman and CEO of the United Microelectronics Corp (UMC), who also has accumulated decades of experience working in Silicon Valley and Hsinchu Science Park.
Hu said American semiconductor companies did well as integrated device manufacturers (IDMs), but as Moore's Law progressed, the cost of developing new technologies and building fabs became prohibitively expensive for each IDM. That gave Taiwan's foundry service a niche to serve the customers so that they don't need to shoulder the capital burden themselves.
"This is a splendid business model because it is mutually beneficial," said Hu. "In hindsight, what America should have done back then is to establish a foundry company in the US to compete with TSMC and UMC." Now there is GlobalFoundries doing the job, and Intel is also spinning off its manufacturing division to become Intel Foundry Service.
Yet even TSMC founder Morris Chang admitted that not many people back then had confidence in this business model. Some initial shareholders of TSMC quickly dumped their shares after its IPO.
Currently, American companies such as Broadcom, Apple, Qualcomm, Nvidia, AMD, and TI are all major IDMs that place their orders with TSMC or UMC to have their chips produced and send to outsourced semiconductor assembly and testing (OSAT) companies to be packaged into final products to be sold by channels.
"Take TI as an example of a feature phone chip supplier in the past, TSMC, UMC, Chartered, and SMIC competed for its foundry business, and TI gave the largest volume to those that can produce chips with its specifications with the best yields," Hu said. "TI no longer needs to carry the financial risk of capital expenditures to have its chips produced, thanks to the foundry business model created by Taiwan and supported by worldwide customers, including those in the US."
The global division of labor has been highly efficient and effective, but it is now transforming into a regionalized supply chain as resilience became a key issue of operations during the pandemic.
Taiwan's Premier Chen Chien-jen said he would not comment on it when inquired by the legislators on the Taiwan government's response to Trump's accusations. But he emphasized that Taiwan and the United States are working closely in terms of economy, trade, and industries. "We continue to work on collaborating with the US to achieve a win-win, and have maintained good relationships with the American administration, the Congress, and liaisons with both the Democratic and Republican parties," said Chen.
Editors' note: This article has been updated to improve the accuracy of details that happened in the past.
