Taipei: With the Trump administration encouraging Taiwanese manufacturers to invest in the United States through tariffs, the Directorate General of Budget, Accounting and Statistics (DGBAS) remarked on Saturday that such investments would not result in the industrial hollowing out of Taiwan.
According to Focus Taiwan, the contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) has pledged an additional investment of US$100 billion in Arizona to construct three more advanced wafer fabs, two integrated circuit assembly plants, and a research and development center, totaling US$165 billion of investment in the U.S. Many of TSMC's suppliers are contemplating following suit to mitigate tariff risks. Despite these developments, DGBAS dismissed concerns about potential industrial hollowing out in Taiwan akin to the scenario three decades ago when Taiwanese investors moved to China, leading to reduced investments in Taiwan.
DGBAS Department of Statistics chief, Tsai Yu-tai, noted that in the 1990s, Taiwanese firms moved to China to capitalize on low labor costs, leading to industrial prosperity for a time. However, these firms, primarily from old economy sectors like petrochemical and textile industries, did not focus on high-end technology. Consequently, they were supplanted by Chinese competitors when China bolstered its industrial capabilities, narrowing the economic development gap with Taiwan and causing low growth and industrial hollowing out.
In contrast, the recent U.S.-China trade war has prompted many Taiwanese firms to consider U.S. operations to avoid high tariffs. Tsai highlighted that while old economy industries were easily replaced by Chinese counterparts, the semiconductor industry is distinct. TSMC's investments in Arizona include US$65 billion in three wafer fabs, with the first reaching mass production in late 2024 using 4 nanometer technology. The second fab is slated for commercial production in 2028 with more advanced processes, and the third fab's construction is anticipated to commence soon.
Tsai acknowledged that political factors influence semiconductor firms like TSMC to some extent, but emphasized that the company prioritizes capitalizing on investments and profitability. He also mentioned that semiconductor firms are likely to retain the latest technologies in Taiwan by investing in research and development.
Tsai reassured that concerns over technology theft in the U.S. are unfounded, as the American market's capital-intensive nature could help Taiwanese semiconductor firms upgrade technologies. Given Taiwan's limited resources, the U.S. is expected to compensate with its high-end tech professionals to advance research and development.
TSMC has clarified that its U.S. investments aim to meet American client demands. Echoing Tsai, Wang Jiann-chyuan, vice president of the Chung-Hua Institution for Economic Research, stated that Taiwanese high-tech manufacturers need to consider customer base and raw material supplies when entering the U.S. market. Wang noted the difficulty in replicating Taiwan's semiconductor ecosystem abroad.
Investment in the U.S. is anticipated to extend Taiwan's industrial reach by leveraging American technologies, talent, and capital markets, thereby facilitating growth. Companies listed on U.S. stock markets can utilize the capital market to strengthen their position.
Currently, several Taiwanese firms, including TSMC and United Microelectronics Corp., have listed their American depositary receipts on the U.S. market, signaling a strategic move to enhance their global business opportunities. Pai Tsung-cheng, head of the Supply Management Institute, emphasized that utilizing the global market could help Taiwanese firms seize more business opportunities worldwide.