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Taiwan asks US if it could chill out on the anti-China rhetoric

We're trying to run a chip business here

Taiwan is keen for the US to scale back on its anti-China stance amid concerns that scare stories about the dangers of relying on chips made on the island nation are harming the country's business interests.

According to reports, Taiwanese officials have engaged in informal discussions with their American counterparts in efforts to tone down emotive claims that it is dangerous to count on chips manufactured there. Such claims were sparked by China's insistence that Taiwan is a renegade province which it intends to reclaim using military force if necessary.

The shortages that hit the global technology market as chip demand soared early in the pandemic highlighted the strategic importance of Taiwan, and just how much of the semiconductor industry is concentrated in one small island. Last year, it was estimated that 48 percent of the global foundry market and 61 percent of the capacity for 16nm nodes or smaller are based in Taiwan.

Bloomberg claimed that officials locked in discussions called out US Commerce Secretary Gina Raimondo, who apparently condemned American reliance on chip supplies from Taiwan as "untenable" and "unsafe." It cites, as usual, unnamed sources familiar with the matter.

Raimondo was warning last year that the US could go into a "deep and immediate recession" and face greater security risks if it lost access to Taiwan's supply of semiconductors.

Taiwan is caught in a difficult position between China and the US. The island's semiconductor industry is a major contributor to its economy, and so vital that it can count on US help should China invade. But Washington is now trying to minimize its reliance on imported chips by building up its own domestic manufacturing capacity through CHIPS Act funding.

Taiwanese semiconductor giant TSMC is playing a part in this by investing in two large new fabrication plants in Arizona. However these are still expected to provide just a tiny fraction of the output from TSMC's total manufacturing capacity in Taiwan.

TSMC is also said to be unhappy with regards to the conditions that Washington is attaching to any subsidies made available under the CHIPS Act funding, which may require it to share profits and disclose operational details.

Taiwan has likewise been caught in the ongoing chip war between the US and China, through which Washington has sought to cut off Beijing's access to cutting-edge technologies, supposedly because they may find their way into the Chinese military.

Last month, an executive at Mediatek, a Taiwan-based fabless semiconductor company, complained that US sanctions were hurting small to mid-size businesses like his and actually helping their Chinese competitors by causing Beijing to direct government funding to them.

Elsewhere, US sanctions on China may actually increase global dependence upon another Asian economy, South Korea, according to a recent report from research outfit TrendForce.

This is because restrictions imposed by the CHIPS Act prevent the manufacturers from investing in production in China, and the two largest memory chip makers are based in Korea, with Micron in the US coming third.

Based on the plans of these three suppliers, TrendForce estimated that South Korea's share of global DRAM capacity will continue to rise and may reach 65 percent by 2025, while China's will decline year on year.

Meanwhile, the makers of chip manufacturing equipment have said that they actually expect sales to China to rise this year despite the US sanctions.

While restrictions on the sales of advanced lithography equipment are already in place for US-based Lam Research and in the process of being applied for ASML of the Netherlands, both companies expect to see an increase in shipments to China of less advanced equipment, according to Reuters, because of demand for chips used in electric vehicles.

ASML reported its results for the first quarter of 2023 this week, showing net sales of €6.7 billion ($7.3 billion), up from the €6.43 billion for the final quarter of 2022. ®

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