Loss of Taiwan chip facilities would be “catastrophic” for US economy: US Secretary of State.

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The U.S. Commerce Secretary Gina Raimondo recently voiced concerns that a Chinese seizure of Taiwan and its leading semiconductor manufacturer, TSMC, would be catastrophic for the American economy. Speaking at a U.S. House hearing, Raimondo emphasized the United States’ heavy reliance on TSMC, which supplies 92% of America’s leading-edge chips.

This dependency is critical given TSMC’s role as the world’s largest contract chipmaker, with major clients like Apple and Nvidia. The potential geopolitical upheaval threatens not just economic stability but also the technological supremacy that TSMC’s chips underpin across various U.S. industries.

In response to these vulnerabilities, the U.S. government is taking significant steps to bolster domestic semiconductor production. Last month, Raimondo announced a substantial subsidy of $6.6 billion for TSMC’s Arizona operations, which is part of a broader commitment by TSMC to invest $65 billion in the state. This move aligns with the goals of the 2022 Chips and Science Act, which aims to reduce U.S. dependence on Asian semiconductor supplies by encouraging stateside manufacturing.

This legislation also includes provisions for $52.7 billion in research and manufacturing subsidies, plus $75 billion in government loan authority, highlighting the strategic importance of semiconductors in national security and economic policy.

The urgency of expanding U.S. semiconductor manufacturing capabilities becomes starkly apparent when considering a 2023 U.S. government report, which predicts that a significant disruption in Taiwanese chip manufacturing could spike U.S. logic chip prices by up to 59%. This scenario underscores the potential economic shockwaves that could result from geopolitical tensions in Taiwan, emphasizing the critical nature of the U.S. initiatives to secure a more stable and independent supply chain for essential semiconductor technology.

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