US presidential candidate Donald Trump's comments accusing Taiwan's chip industry of stealing American business and demanding protection fees have cast a shadow over the booming global semiconductor industry.
Trump's resurgence of protectionist rhetoric, combined with the Biden administration's plans to impose strict sanctions on allied manufacturers exporting chip technology to China, has sent ripples across the field.
Key players like TSMC, ASML, Nvidia, and AMD find themselves caught in the middle of these actions. This threatens to upend the prosperous growth of the Taiwan-US semiconductor supply chain experienced so far in 2024 due to AI's surge.
The threat of protectionism
The global semiconductor industry has been navigating the US-China AI chip war within the broader context of the G2 competition. Now, the return of Trump's protectionist agenda has added complexity for the big players.
The potential benefits for Intel and GlobalFoundries under Trump's policies remain uncertain, as the US relies heavily on Taiwan's TSMC for advanced AI chips and high-end mobile processors.
ASML, the sole critical equipment supplier for TSMC's advanced processes, is also affected. However, the impact comes not from Trump's comments but from the Biden administration's consideration of direct export controls on ASML equipment, threatening its revenue from the Chinese market, which accounts for half of its sales.
Both the protection fee remarks from Trump and Biden's proposed strict sanctions on ASML reflect that the US is marching towards more protectionist mindsets, albeit with different strategies.
The former's approach is purely unilateral, focused on America first, disregarding the significant threat posed by China's competition and the support from East Asian allies in the semiconductor supply chain. The latter's strategy continues the overarching framework of the US-China chip war. The aim is to secure the Indo-Pacific chip supply chain alliance, including the US, Taiwan, South Korea, Japan, Southeast Asia, and India, to curb China's progress in semiconductor manufacturing.
The potential fall of the house of chips
According to the Wall Street Journal, Taiwan's fall to China would signify the end of the US-Pacific alliance system, which has maintained basic peace for 80 years. If Trump dismantles the Biden-era Taiwan-US chip strategic alliance and abandons the obligation to protect Taiwan, the Pacific alliance system could collapse under his leadership.
Consequently, Taiwan's semiconductor supply chain would no longer need to consider diversified production lines within the G2 competition framework. The US would lose its global dominance and cooperative and control relationships with East, Southeast, South, and Middle Eastern allies. It would only be after losing Taiwan that the US might recognize the necessity of regaining control through military force.
Currently, the Biden administration is in a vulnerable position. Bloomberg reports that American companies view export restrictions to China as unfair punishment and are pushing for changes. With only a few months left until the next US presidential election, American allies see no reason to change the policy.
Trump's rising popularity suggests the possibility of a second term, which the market views positively. However, Trump's current policy stance and comments on Taiwan's chip industry could pose a significant risk, potentially leading to another global economic downturn.
