Taiwan commits to investing US$250 billion in U.S. chip sector

Taipei, Jan. 16 (CNA) Taiwan and the United States have reached an agreement under which Taiwan semiconductor and technology companies will invest at least US$250 billion in the U.S. as part of trade talks that concluded on Thursday, government officials said Friday.

The commitment was part of an overall agreement, outlined in a memorandum of understanding (MOU) signed in the U.S., that will also lower the 20 percent tariff on Taiwan-made goods to 15 percent, and include US$250 billion in credit guarantees for Taiwanese companies investing in the U.S.

At a press conference in the U.S., Vice Premier Cheng Li-chiun (鄭麗君) said that while there was an MOU signed on the investment commitments, a more formal trade pact would be signed in the coming weeks.

It would cover the tentative deal reached on the tariff reduction and the granting of semiconductors and related products the most favorable treatment under Section 232 of the U.S. Trade Expansion Act, though the final tariff rates and quotas have yet to be finalized, she said.

Once signed, the agreement would be the first of its kind with the U.S. and would significantly reduce uncertainties faced by domestic high-tech companies, Cheng said.

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According to a fact sheet published by the U.S. Commerce Department, Taiwanese firms building new U.S. semiconductor capacity may import up to 2.5 times that capacity duty-free under Section 232 during construction, with preferential rates applying above the quota.

Once projects are completed, firms may still import up to 1.5 times their U.S. production capacity duty-free, it said.

In describing the investment amount, Cheng said the MOU did not provide a timeline on when the US$250 billion investment pledge would have to be fulfilled, indicating instead that it would be up to the companies themselves.

It was not immediately clear if the US$250 billion investment commitment included the US$165 billion Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chipmaker, has already pledged to invest in the U.S.

There have been concerns that having Taiwanese semiconductor companies invest heavily in the U.S. and meet its demand for chips would hollow out Taiwan's domestic industry and eliminate the "silicon shield" that protects it from a Chinese attack.

Cheng did not address whether the agreement would reduce U.S. dependence on Taiwan and make it less likely to defend Taiwan against an attack, but she did not agree that the increased investment would hurt the domestic semiconductor industry.

"While every country pursues its own national security goals, Taiwan's priority is to support the international expansion and extension of its high-tech industries," Cheng said.

"This is not an industrial relocation but an extension and expansion of Taiwan's technology sector," she said, indicating that the sector's output has grown at home while semiconductor companies have expanded their overseas investment footprint.

That may be true, but the domestic semiconductor sector, and especially TSMC, has only recently begun investing abroad, with production in the U.S. and Japan accounting for only a small portion of its total revenue.

U.S. Commerce Secretary Howard Lutnick said in an interview with CNBC Washington aims to have 40 percent of Taiwan's supply chain located in the U.S., but Economic Affairs Minister Kung Ming-hsin (龔明鑫) said Friday that would not happen even under the new agreement.

He said in Taipei the Ministry of Economic Affairs has projected that about 80 percent of 5-nanometer chips or more advanced ones will be produced in Taiwan in 2036.