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Not So Fab

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Not So Fab

August 16, 2023

This paper originally appeared in the German Marshall Fund's report, Next-Generation Perspectives on Taiwan Insights from the 2023 Taiwan-US Policy Program.

Download a pdf of the full report.

Three years into the construction of a new plant for the giant Taiwan Semiconductor Manufacturing Company (TSMC) in the Arizona suburbs, tensions are growing over the future of investments such as the one that made it possible. The fabrication plant, or fab, is a flagship project of the CHIPS and Science Act, the $280 billion package for the chip and other technology sectors that US President Joe Biden signed into law last August, and that the Department of Commerce started implementing in February by opening grant applications to technology companies. But semiconductor executives in Taiwan, who have cooperated with requests from American officials to make costly investments in the United States, feel they are passed over for state funding in favor of struggling US firms such as Intel.

The result is a growing rift in trade and technology that will slow critical advances in semiconductor manufacturing, hurt US access to the latest chip technologies, and damage US interest in staying ahead of China while maintaining trade relationships with other democracies.

The worsening situation calls for a different approach to international cooperation. The United States needs to abandon the belief that it alone can reinvigorate its national manufacturing capabilities and instead work to supercharge the Chip 4 Alliance that joins the country with Japan, Taiwan, and South Korea, and promotes fairer treatment of American technological partners in Taiwan.

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