Morris Chang, founder of Taiwan Semiconductor Manufacturing Co. , gave a rare interview in April. He believes Congress’s current effort to provide $50 billion in subsidies to American semiconductor companies, in the hope that they will become industry leaders, is “a very expensive exercise in futility.” While he may be correct that U.S. firms are unlikely to overtake TSMC, that isn’t the point: Complete dependence on Taiwan for advanced semiconductors puts American national security at risk.
TSMC manufactures 92% of the advanced semiconductors necessary for every smartphone, laptop and ballistic missile. U.S. firms such as Nvidia, Qualcomm and Apple outsource almost all their manufacturing to Taiwan. If Taiwan’s chip manufacturing capacity went offline or fell into China’s hands, America’s technology sector would be devastated. As former Deputy Defense Secretary Robert Work has warned, conflict in the Taiwan Strait could spark a national-security crisis over chips: “We’re 110 miles”—the distance from Taipei to the mainland—“away from going from two generations ahead to maybe two generations behind.”
Washington recognizes the need to deter Beijing from seizing the chips that power American electronics. Nevertheless, policy makers are struggling to prevent China from capturing the semiconductor market with the same tactics it used to dominate the markets for telecommunications infrastructure, solar panels and electric vehicles. While the Biden administration has proposed a $50 billion investment in semiconductor manufacturing through the U.S. Innovation and Competition Act, Congress continues to discuss the legislation but not pass it. If Congress enacts the bill, U.S. investment would still be only a third of what the Chinese government will spend.