The US has verified an enormous $6.6 billion subsidy for Taiwan Semiconductor Manufacturing Company (TSMC), supporting the government’s campaign to increase local chip manufacturing in response to geopolitical confrontation. This decision is timely, especially given the implications arising from a possible comeback of former President Donald Trump and the strong focus on economic nationalism.
TSMC: A Strategic Ally

Taiwan semiconductor manufacturing company, TSMC, is an industry giant and serves as the central player in the international technology supply chain. It is contained in the CHIPS and Science Act, a new law passed in the United States in a bid to cut its reliance on imported chips and to compete for the future’s best technologies. The funds will be used to continue the construction of a 12 billion dollar chip manufacturing plant in Arizona that TSMC is building and plans to start production in 2024.

This has been viewed as an investment with the potential of improving on the strength of the semiconductor industry based in the United States with a view to guaranteeing enough supply of chips in the ongoing industries, for instance, consumer electronics all the way to the defence industry.

Why Now?

When this announcement was made, it was very strategic. The United States has been upping the ante to challenge China’s progression in technology with semiconductors proving sensitive. The subsidy demonstrates the government’s interest in fostering a chip hub that reduces vulnerability in case of disruptions in the supply chain.

Furthermore, Cho continues talking about Trump’s possible return to the American political scene and creates discussions about its industrial policies. While in office, Trump supported nationalism to boost the manufacturing industry's new idea of America's first policies aimed at reducing the consumption of imported products.

Industry and political consequences

While the subsidy has been hailed as revolutionary to engineering independence, it has not been understood clearly as to what it will do in the future. Some people claimed that subsidies alone could not close the gap between American and Asian players, particularly TSMC.

Besides, it has potential political ramifications as well. They could also have political sideshows. Since Trump is still unpopular, his comeback is likely to shape future policies. Withdrawal from global trade, stiff tariffs, and more funding for innovation in Silicon Valley.

Looking Ahead

The $6.6 billion subsidy affirms the federal government’s determination to protect the nation’s semiconductor supply chain. As to whether this investment can generate those intended outcomes, we are yet to see; however, one thing is certain: the stakes in the chip wars have never been this high.