Semiconductor Policy Workshop:
Developing a Win-Win Strategy for the United States, Taiwan, and Partners
Hosted by the Stimson Center & the Taipei School of Economics and Political Science Foundation
Stimson Center, Washington, DC
September 15, 2023
Distinguished speakers from both Stimson and Taiwan, ladies and gentlemen:
Good morning. Welcome and thank you for joining this significant conference. A few days ago, we also co-sponsored a conference on semiconductors and geopolitics with Harvard Kennedy School. Both the conference at Harvard and at Stimson are entirely self-sponsored, non-governmental and academic. Now, I would like to take this opportunity to share with all the experts and participants here and online, several views of mine on this topic.
From the historical perspective of the semiconductor industry, semiconductors have almost exclusively represented innovation. The continuous innovation in semiconductors has transformed the industry from being controlled by a few early companies into a diverse landscape of leading companies along the supply chain. This transformation has altered the industrial structure, fostered economic development, and improved people's well-being. Over the past 70 years, semiconductors have brought comfort, convenience, progress, peace, and globalization to humanity, rather than wars, and are irrelevant to geopolitics.
Taiwan's semiconductor industry is a 'unique system,' representing the culmination of talent, teamwork, and hard work. It consists of a complete ecosystem and industrial clusters. The entire upstream and downstream industry chains, American companies included, have all benefited. This is a realization and history of multiple wins. It is also an operational model with significant economic benefits and a distinctive industry culture that is not easily transplanted and even more challenging to replicate. Taiwan's position in the global semiconductor industry chain is built on this foundation and is completely unrelated to geopolitics. The two are of different levels and nature, and not cause and effect for each other. Whether China invades Taiwan has nothing to do with this semiconductor factor. In fact, among all of China's statements so far, there has never been any mention that Taiwan's semiconductor industry would be one of the reasons for the invasion.
Originating from the United States, the semiconductor industry, which the United States has long led and promoted, has now evolved into an industry with the longest supply chain and the most cross-border operations. Today, no single country, including the United States, can independently control all the key nodes and processes in the semiconductor industry chain, and no single country, including the United States, produces enough semiconductor products to meet the global market's total demand. While the United States remains a stronghold for the IC design and chip manufacturing equipment, the labor shifts from manufacturing to IC design and various modern service industries resulted in a shortage of manufacturing talent. Moreover, coupled with high costs, this presents a fundamental structural challenge facing the US semiconductor industry. The United States must confront these realities.
For a long time, the United States has been an advocate, practitioner, and beneficiary of free trade and globalization in its policies towards the semiconductor industry. In recent years, due to changes in the global power dynamics, the U.S. semiconductor policy has taken on a stronger national security emphasis. Due to the influence of geopolitics, the United States has implemented export controls and bans, which not only impact the productivity and efficiency brought about by globalization but also undermine the positive effects of free trade. These are ongoing developments that have led to a new competitive landscape for the semiconductor industry.
The United States, in its efforts to regain a leadership position in the semiconductor industry, is eager to fill one specific gap: the semiconductor manufacturing. Therefore, it has strenuously invited TSMC to establish a factory in the United States. The establishment of TSMC's Arizona facility, referred to as "Fab A," marks a new journey and milestone for the U.S. semiconductor industry. However, due to the high construction costs and the cultural differences in the industry between the United States and Taiwan, it is expected that TSMC's "Fab A" may require a period of adjustment and learning before we see immediate effects.
"Democracy and market economy" were the two pillars that defeated Nazism and Stalinism in the 20th century, and they have been the two mainstays supporting America's strength and prosperity since its founding. Faced with the new competition in the semiconductor industry and the challenge of TSMC's "Fab A," if we wish to overcome the difficulty and lead the future, the fundamental approach may lie in incorporating "democracy and market economy" into our core beliefs and guiding principles that we should adhere to and follow.
I encourage all participants to engage actively in the discussions. The issues we tackle here demand ongoing attention and collaboration. Thank you very much.