Taiwan vowed Friday, January 16, to remain the world’s “most important” AI chipmaker, after reaching a trade deal with the United States that will reduce tariffs on the island’s shipments and increase Taiwanese investment on US soil. Taiwan is a powerhouse in producing chips – a critical component in the global economy – but the US wants more of the technology made in America.
The agreement “will drive a massive reshoring of America’s semiconductor sector,” the US Commerce Department said. Under the deal, Washington will lower tariffs on Taiwanese goods to 15%, down from a 20% “reciprocal” rate meant to address US trade deficits and practices it deems unfair.
Taiwanese Premier Cho Jung-tai praised negotiators Friday for “delivering a well-executed home run” following months of talks. “These results underscore that the progress achieved so far has been hard-won,” Cho said.
Taiwan’s dominance of the chip industry has long been seen as a “silicon shield” protecting it from an invasion or blockade by China and an incentive for the US to defend it. But the threat of a Chinese attack has fuelled concerns about potential disruptions to global supply chains, increasing pressure for more chip production beyond Taiwan’s shores.
“Based on current planning, Taiwan will still remain the world’s most important producer of AI semiconductors, not only for Taiwanese companies, but globally,” Taiwanese Economic Affairs Minister Kung Ming-hsin assured reporters on Friday. Production capacity for the advanced chips that power AI systems will be split about 85-15 between Taiwan and the US by 2030 and 80-20 by 2036, he projected.
China’s foreign ministry expressed strong opposition to the deal. “China consistently and resolutely opposes any agreement (…) signed between countries with which it has diplomatic relations and the Taiwan region of China,” ministry spokesperson Guo Jiakun said, urging Washington to abide by the one-China principle. China claims Taiwan as part of its territory, and has not ruled out using force to bring it under its control.
‘New, direct investments’
The deal will need to be approved by Taiwan’s opposition-controlled parliament where lawmakers have expressed concern about the potential for Taiwan to lose its chip dominance. Cheng Li-wun, chairperson of the Kuomintang party which advocates closer ties with Beijing, criticized the deal, saying that increasing Taiwanese investment in US chip production capacity risked “hollowing out” the island’s economy.
Subscription
€2.49€/month for the first year
Get unlimited access to Le Monde in English articles.
Find out more
New
Le Monde’s app
Get the most out of your experience: download the app to enjoy Le Monde in English anywhere, anytime
Download
Help us improve Le Monde in English
Dear reader,
We’d love to hear your thoughts on Le Monde in English! Take this quick survey to help us improve it for you.
Take the survey
Sector-specific tariffs on Taiwanese auto parts, timber, lumber and wood products will also be capped at 15%, while generic pharmaceuticals and certain natural resources will face no “reciprocal” duties, the US Commerce Department said.
Meanwhile, Taiwanese chip and tech businesses are set to make “new, direct investments totalling at least $250 billion” in the US to build and expand capacity in areas like advanced semiconductors and AI, the department said. Taiwan will also provide “credit guarantees of at least $250 billion to facilitate additional investment by Taiwanese enterprises,” it said, adding that this would support the growth of the US semiconductor supply chain.
TSMC welcomes deal
More than half of Taiwan’s exports to the US are information and communications technology products, including semiconductors.
The announcement did not mention names, but the deal has key implications for Taiwanese chipmaking titan TSMC, which last year pledged to spend an additional $100 billion on US plants. Frenzied demand for AI technology has sent profits skyrocketing for the company, the world’s biggest contract maker of chips used in everything from Apple phones to Nvidia’s cutting-edge AI hardware.
“As a semiconductor foundry serving customers worldwide, we welcome the prospect of robust trade agreements between the United States and Taiwan,” TSMC said in a statement Friday. “Strengthened trade relations are essential for advancing future technologies and ensuring a resilient semiconductor supply chain.”
Lutnick said TSMC has bought land and could expand in Arizona as part of the deal. “They just bought hundreds of acres adjacent to their property,” he told CNBC. “Now I’m going to let them go through it with their board and give them time.” Taiwanese producers who invest in the US will be treated more favorably when it comes to future semiconductor duties, the Commerce Department said.
A day prior, US officials held off imposing wider chip tariffs, instead announcing a 25% duty on certain semiconductors meant to be shipped abroad, a key step in allowing US chip giant Nvidia to sell AI chips to China.