China’s seizure of TSMC would be ‘absolutely devastating’: US officials

Semiconductor war: During a US House hearing on Wednesday, US Commerce Secretary Gina Raimondo expressed grave concerns over the potential impact of a Chinese invasion of Taiwan and the seizure of chip producer TSMC on the American economy, labelling it as "absolutely devastating."

Raimondo highlighted the crucial role of TSMC in the semiconductor supply chain, noting that the United States currently relies on the company for 92 per cent of its leading-edge chips. She refrained from speculating on the likelihood or manner of such an event but underlined the ramifications it would entail.

Last month, Raimondo announced a substantial subsidy of $6.6 billion for TSMC's US unit to support its advanced semiconductor production in Phoenix, Arizona, along with additional government loans of up to $5 billion. The move aligns with TSMC's commitment to expand its investment in the United States, with plans to invest $65 billion and establish a third fab in Arizona by 2030.

TSMC aims to employ cutting-edge 2-nanometer technology at its second Arizona facility, scheduled to commence production in 2028. The company, a key supplier to tech giants like Apple and Nvidia, had previously pledged $40 billion for its Arizona operations and anticipates initiating high-volume production at its first US fab by the first half of 2025.

In response to concerns about semiconductor supply chain vulnerabilities, Congress passed the Chips and Science Act in 2022, allocating $52.7 billion in subsidies for research and manufacturing to bolster domestic semiconductor production. An additional $75 billion in government loan authority was also approved to reduce dependence on Asian chip suppliers.

A 2023 US government assessment underscored the potential repercussions of a major manufacturing disruption in Taiwan, estimating a possible 59 per cent increase in the US price of logic chips, impacting downstream domestic producers.

(With Reuters inputs)