The Looming Taiwan Chip Disaster That Silicon Valley Has Long Ignored - The New York Times
After the call, the Semiconductor Industry Association hired McKinsey to take a look. They started with a basic question: What would happen if companies couldn’t get chips from the island?
A summary of the resulting report opened with a map of Taiwan detailing how integral the island is to the global economy. Taiwan enabled roughly $10 trillion of the world’s gross domestic product. It made chips for iPhones and more than half of so-called memory chips for cars, and it led in assembling A.I. chips.
The island’s semiconductor manufacturing is mainly in Hsinchu, an area where Taiwan’s government discouraged manufacturing after World War II because it is next to the sloping beaches that are the best place for an amphibious assault against the island.
If Taiwan’s factories were knocked offline, the impact would be immediate, the roughly 20-page report said. Economies would flounder. In China, the gross national product would fall by $2.8 trillion; in the United States, the drop would be $2.5 trillion.
Other reports, including one by Bloomberg Economics, a research service, estimate a conflict would cost the global economy more than $10 trillion.
The first part was easy. TSMC committed more than $50 billion to building a second and third plant in Arizona, two years after announcing its first facility during Mr. Trump’s first term. Intel promised to expand in Arizona and invest as much as $100 billion in an Ohio campus. Samsung pledged $45 billion for two factories in Taylor, Texas.
Customers were reluctant to buy chips that cost more than 25 percent more and were a generation behind those made in Taiwan, where the government has an unofficial rule requiring TSMC to put its most cutting-edge technology on the island first.
Intel and Samsung, despite their pledges to expand production, didn’t have any commitments. Their technology had fallen behind TSMC’s, and the industry doubted they could catch up.
Mr. Trump met with Mr. Tan days later and suggested that Intel give the United States 10 percent of Intel’s business. The chief executive agreed to the unorthodox request, even though some argued it was on shaky legal ground. Intel gave the government equity in exchange for the $8.9 billion it had been promised from the CHIPS Act.
The deal helped Intel secure its federal subsidies, without having to meet financial benchmarks to qualify for the money.
He told top chip executives, who had gathered for a Semiconductor Industry Association meeting, that the administration wanted them to buy 50 percent of their semiconductors from American plants, four people who attended said. Companies that didn’t would pay a 100 percent tariff.