US hijacks Taiwan’s high-tech industries, squeezes island’s economic future

Photo: CFP

 
From seizing Taiwan’s high-end manufacturing industry and coercing Taiwan Semiconductor Manufacturing Company (TSMC), to the advocate that calls for Taiwan’s “decoupling” with the Chinese mainland, and a “trade initiative” that only benefits the US, Washington has firmly taken grip over the Democratic Progress Party (DPP) authorities’ mind when it comes to “relying on the US to seek secession,” while at the same time hollowing out Taiwan region’s economy, and making the island a complete pawn to serve the US’ interests in containing the Chinese mainland.

Taiwan regional authorities’ top trade negotiator on Friday held a virtual meeting with Deputy US Trade Representative (USTR) Sarah Bianchi, exchanging information on the two sides’ preparations to implement the first agreement signed under the “Initiative on 21st Century Trade,” according to Taiwan media. However, analysts are not optimistic that a US-led pact will bring tangible benefits to Taiwan’s flagging economy.

Analysts said that DPP authorities, in order to advance secessionism, have been colluding with the US in containing Chinese mainland and poisoning cross-Straits relations, which is the root cause of Taiwan’s current economic turmoil. Given the mainland is Taiwan’s largest export market and the largest source of trade surplus, once cross-Straits relations continue to deteriorate, it will be more difficult for Taiwan region to emerge from its current predicament.

Hollowing out TSMC 

The semiconductor industry has increasingly been targeted as a key battlefield of US strategic competition with China in high-tech sector. Washington has attempted to establish an advantage over Beijing by establishing a China-excluded semiconductor industrial chain and taking export control measures against China. Taiwan’s semiconductor industry, which has a leading advantage, has then become a key focus for US officials.

Under pressure from the US, TSMC, like other Taiwan chipmakers, were forced to agree to set up factories in the US. Due to the shortage of skilled labor and the high cost of manufacturing in the US, the new plant in Arizona has announced that the mass production will be delayed to 2025.

More than 500 Taiwan engineers and their families have been relocated to the US, according to  Wang Wu-lang, secretary-general of the Labor Party in Taiwan.

In addition to relocation of technical personnel, TSMC’s service supply keys, customers and other core business data is very likely to be handed over to the US Department of Commerce, he added. 

The semiconductor industry is a pillar industry for Taiwan’s economic development, with the contribution of the semiconductor industry to Taiwan’s overall GDP at 13 percent, local media reported. 

However, the development of Taiwan’s semiconductor industry is highly dependent on the US market, including sourcing equipment, raw materials and capital, according to Wang Ziqi, an associate researcher at the Institute of Taiwan Studies at the Chinese Academy of Social Sciences.

According to TSMC’s latest financial report, in 2022, TSMC’s biggest source of revenue last year was the US market, which accounted for 65.96 percent of its total sales worth NT$1.49 trillion ($470.6 billion), and foreign investors led by the US hold more than 70 percent of the shares in Taiwan chipmakers. Most profits are also extracted by US investors, Wang said. 

According to the experts, by threatening to impose export controls on chip design software and manufacturing equipment, the US government can force TSMC to roll out the latest manufacturing process in the US and Taiwan region simultaneously, meaning TSMC’s technology, talent, and investment flow to the US, and gradually hollow out Taiwan’s domestic semiconductor industry.

By hollowing out TSMC, the ultimate goal of the US is to develop its own domestic production capacity and supply chain, and finally reduce its dependence on Taiwan’s chip manufacturing, Wang Ziqi said. 

The second is to build Taiwan’s semiconductor industry into a geopolitical tool and weaken the link between high-tech industries on two sides of the Taiwan Straits, he added. 

Losing economic autonomy 

Some observers see the dilemma of Taiwan’s semiconductor industry as the epitome of the island losing economic autonomy. 

The US and DPP authorities signed an initial agreement under the “Initiative on 21st Century Trade” in June. However, the agreement does not cover tariff reductions or exemptions which Taiwan region concerns most, but covers content at US interests like customs and trade facilitation, domestic regulation of services, anti-corruption practices, and small and medium-sized enterprises.

The signing of a “America-first” initiative is bound to harm the interests of the Taiwan people, said Wang Jianmin, a cross-Straits expert at Minnan Normal University, noting the island has removed ban on importing Ractopamine-enhanced pork from the US.

The US is trying to pull Taiwan region into the US-led economic and technological standards system, fully control Taiwan’s economic industries, and make Taiwan unconditionally dependent on the US, he added. 

Chang Meng-tsung, a member of Chinese Unification Promotion Party, opposition party on the island of Taiwan, once told media that if the “trade initiative” is really implemented, Taiwan’s economic activities will lose autonomy, making the island a “economic colony” of the US.

No more a safe place for business?

In recent years, the US and some Western politicians and media have vigorously promoted  Taiwan as “the most dangerous place in the world” and hyped “Ukraine today, Taiwan tomorrow,” which not only causes anxiety in Taiwan, but also forced Taiwan authorities to purchase more US weapons for “war preparation,” crowding out social welfare and local construction expenditures.

Analysts believed that these acts of undermining regional peace and stability cannot substantially change the huge gap of cross-Straits military strength, but will seriously harm the attraction of investing in Taiwan region.

And it has happened. According to a CNBC report on May 19, of Warren Buffett’s Berkshire Hathaway revealed that it has completely abandoned its recently acquired stake in TSMC. Buffett, one of the world most successful investor, said in recent weeks that the geopolitical factors was “certainly a consideration” in his decision. 

People have realized that Taiwan island is in high danger of being pushed into a battlefield by the US, said Wang Wu-lang, secretary-general of the Labor Party in Taiwan.

Once the US completes the relocation of TSMC’s advanced manufacturing process, Taiwan island is more likely to become the real military forefront to contain the China mainland, he added. 

And that caused the export-dependent island to slide into recession in Q1, with a gross domestic product contracted by 3.02 percent in Q1 versus a year earlier. 

The DPP authorities have blamed the global economic recession for their lackluster economic performance. But experts point to a sharp drop in exports to mainland as the main reason for the decline, which illustrates the importance of the cross-Straits relationship.

For a long time, the Chinese mainland has remained Taiwan region’s largest export market and the largest source of trade surplus, and Taiwan’s trade dependence on the mainland is about 40 percent of its GDP. According to data from the General Administration of Customs of China. In 2022, cross-Straits trade volume was $319.678 billion, of which the mainland imported $238.09 billion of products and services from Taiwan.

The Chinese mainland is an irreplaceable market for Taiwan, and without mainland, it would be difficult for Taiwan to continue to maintain sound economic development, according Li Fei, a professor at the Taiwan Research Center at Xiamen University.

The US treats Taiwan as a geostrategic pawn, and after Washington extracts all the value it can,  it will swiftly move to abandon the island, Li said.