We’re just beginning to understand what it means that one of the world’s most powerful companies is planning the largest foreign direct investment in U.S. history here in metro Phoenix.
TSMC (Taiwan Semiconductor Manufacturing Company) is making a $165 billion play in the Arizona desert that at build-out would include six fabrication plants, two advanced packaging facilities and a center for research and development.
This isn’t just a massive scale-up of development already underway in Arizona, it’s part of a global power struggle that involves China, the United States and the island nation about 100 miles off the Chinese mainland that has become a fulcrum of international politics.
Taiwan chip manufacturer hedges its bets
TSMC’s move is “hedging in two directions” explained Walter Russell Mead, a public intellectual and professor of Strategy and Statecraft at the University of Florida's Hamilton Center.“If you were Taiwanese and you would prefer not to see either a war in the Taiwan Strait or an occupation of Taiwan by China, then this is a really good idea and this is an excellent time to do it,” Mead told the Tablet magazine podcast What Really Matters on March 7.
First, the massive investment in America keeps your most important ally happy, Mead said, especially with President Trump threatening to slap tariffs on Taiwan chip imports.
But “suppose, hypothetically, I had some doubts about America’s long-term commitment (to help Taiwan against Chinese aggression), and I was a Taiwanese chip manufacturer, I might want to make sure that my company would survive and flourish whatever happens on Taiwan.
“So, this is both an insurance policy against America failing to help keep Taiwan independent, and a way of making the insurance policy look a little bit stronger – paying a premium on the insurance policy.”
Taiwan executives imagine living in Arizona
Timothy Prickett Morgan observes that with China lurking on the horizon “it has been in Taiwan’s best interest to spread its own risk out geographically.”However, efforts to near-shore Taiwan chip manufacturing in the West make the island nation less crucial for chip supply and thus a lower priority to defend should China invade.
“Expect a lot of Taiwanese executives to consider what living in the Arizona desert might look like for their families,” he wrote.
Taiwan has cornered much of the market on the world’s most advanced microchips, which makes it critical to global manufacturing.
Virtually all of our machines and appliances are powered by data-crunching semiconductors – washers and dryers, refrigerators, automobiles, tractors, aircraft, ships, satellites.
The most advanced semiconductors will power the AI revolution that could rival the printing press for its impact on world history, according to industry leaders such as Google’s Eric Schmidt and OpenAI’s Sam Altman.
That would make Taiwan a critical player in the emerging AI economy. It is also an endangered one.
Potential multi-billion dollar impact on Arizona
China’s President Xi Jingping has told his military to be prepared to take Taiwan by 2027, U.S. intelligence and military officials have reported.As TSMC hedges its bets in America, expect other major East Asian chipmakers to move production to the United States, reports the South China Morning Post.
Among them, South Korean giants LG and Samsung were already looking to move plants to the U.S., the newspaper reported.
The first TSMC plants were projected to generate $38 billion of economic impact every 13 years in Arizona, Christine Mackay, the city of Phoenix's economic development director, told the Phoenix Business Journal.
Now with the company’s $100 billion investment, the economic impact could be four times that, she said.
It may be years before we understand how global power struggles are going to change Arizona.
TSMC’s $165 billion play in Arizona may be a hedge against the next big war | Opinion
Arizona has become the U.S. home of one of the most important high-tech companies in the world. It's going to take some time to process all this.