Taiwan government think tank urges US cooperation on semiconductors

Taipei, July 22 (CNA) Instead of threatening tariffs on Taiwan-made chips, the United States should try to reinforce cooperation with Taiwan on semiconductor development to take on challenges from China, according to a government-run think tank.

The Donald Trump administration has threatened to impose across-the-board import duties of 32 percent on Taiwan-made goods and levy a separate tariff on semiconductors, which Taiwan is hoping to avoid.

The Research Institute for Democracy, Society and Emerging Technology (DSET), a think tank under the National Science and Technology Council (NSTC), said the U.S. efforts should be focused on containing China's semiconductor rise rather than impairing Taiwan.

"Without any measures to take on the challenges from China, the global industrial sector will grow more dependent on Chinese suppliers, which could post tremendous challenges to the global democratic alliance," DSET CEO Jeremy Chang (張智程) said Monday.

Citing a suggestion from the DSET's "Let a Hundred Flowers Blossom report," Chang said cooperation between Taiwan and the U.S. should be reinforced.

"Managed capacity planning and joint R&D between non-Chinese firms, in combination with restrictions on Chinese imports and promotion policies targeting specialized processes, will be critical for the U.S. and its allies to withstand the China semiconductor challenge," the report said.

Non-resident DSET fellow Ho Ming-yen (何明彥) said how democracies impose precise semiconductor export controls against China, in particular on raw materials used in mature chip production, will determine their ability to contain Beijing's expansion in the field.

The U.S., Europe, and East Asian countries such as Taiwan and South Korea should reach a sectoral agreement to determine tariffs and outbound investment restrictions, establish a free trade mechanism across the supply chain, and coordinate on capacity and specialized process development, Ho argued.

The DSET warned that China has been aggressively boosting its visibility in the global semiconductor market through government subsidies, state-directed investments and long-term strategic planning.

"Analysts project that PRC-based firms may account for nearly half of the world's new mature-node manufacturing capacity within the next decade," it said in a research report titled "Great Siege: The PRC's Comprehensive Strategy to Dominate Foundational Chips."

"This trajectory presents a growing risk to the United States, Taiwan, and allied nations that rely on stable, diversified, and market-oriented supply chains," the report said.

Chang said China's presence in the high-end tech arena has become more apparent and allows it to play a key role in the supply chains of the defense industry.

Citing data compiled by TrendForce used in the "Big Siege" report, Chang said China accounted for 34 percent of the global mature chip market in 2023, lower than 43 percent commanded by Taiwan but much higher than the 5 percent held by the U.S.

By 2027, China's market share is expected to rise to 47 percent, while Taiwan's is expected to fall to 36 percent, indicating Beijing will replace Taipei as the largest mature chip maker in the world, while Washington's market share is forecast to fall to 4 percent.

Yet rather than thinking about how to forge closer ties with Taiwan on semiconductor development, it is threatening a tariff on Taiwan-made chips by launching an investigation under Section 232 of the Trade Expansion Act of 1962.

"The Section 232-related investigation could exacerbate the situation as the measure is unlikely to contain China's expansion in the semiconductor industry," Chang said.