The writer is author of ‘Chip War’, visiting fellow at the American Enterprise Institute and a professor at the Fletcher School
When Taiwanese manufacturing tycoon Terry Gou and former US President Donald Trump grabbed ceremonial shovels at the 2018 groundbreaking of a new electronics factory in Wisconsin, many tech analysts and executives saw a textbook example of why politicians should not meddle in supply chains. Wisconsin voters soon learned that Gou’s company Foxconn only invested because it was promised multibillion-dollar subsidies and loosened environmental rules. When Foxconn’s factory plans were dramatically scaled back several years later, it seemed like evidence that political bluster could not overpower market forces.
Five years on, however, intensified US-China tension over technology — and especially semiconductors — has shifted electronics supply chains in slow but significant ways. Foxconn’s Wisconsin facility is far smaller than initially promised, but TSMC, Taiwan’s most valuable company and the world’s biggest producer of processor chips, will soon open a new facility in Arizona. Previously, almost all of TSMC’s recent investment was in Taiwan or China. Now it is diversifying its fabrication footprint, building a new chip fab in Japan and exploring one in Singapore, too. TSMC’s change in tack is driven by subsidies from these governments as well as political pressure to reduce the concentration of chipmaking along the Taiwan Strait.