Strategic Analysis of US-Taiwan Semiconductor Game

Ming-Chi Kuo published his analysis of the recent Trump administration's policy on the chip manufacturing industry and the possible game play

In the context of the U.S.-China technological tug-of-war, the U.S. government's negotiation game with TSMC reflects the strategic picture of the global semiconductor industry chain restructuring.

First, the strategic demands of the U.S. government

1. Maintenance of technological hegemony: by attracting TSMC to set up factories in the U.S., the U.S. government intends to rebuild the production capacity of the local advanced process, make up for the gap of the cutting-edge chip manufacturing below 5nm, and maintain the technological generation gap advantage over China.

2. Industry chain reconstruction: In the context of the decoupling of China and the U.S., the global semiconductor manufacturing center will be transferred to North America to establish a "trusted supply chain" and reduce geopolitical risks.

3. Driven by industrial policy: With the $52 billion subsidy lever of the Chip and Science Act, TSMC promotes the return of the manufacturing industry and realizes the whole chain control from R&D to manufacturing.

TSMC's game wisdom

1. Technology Firewall Strategy
   - Strictly limit the Arizona plant to produce only next-generation N-2 processes (initial 5nm, subsequent 3nm)
   - Keep core R&D and state-of-the-art 2nm technology in Taiwan headquarters
   - Maintain global leadership through technology generation differenceMaintain global leadership through technology generation gap

2. Cost Pass-Through Mechanism
   - U.S. plant construction cost is 4-5 times higher than Taiwan's, share the excess expenditure through government subsidies and customer bargaining
   - Utilize "Technology License Fee + Equipment Depreciation" model to achieve financial equilibrium

3. Geo-Hedge Layout
   - Simultaneously expand overseas production capacity in Kumamoto, Japan and Dresden, Germany
   - Form a triangular production capacity allocation of "Taiwan + US + Japan & Europe"
   - Distribute geo-risks while maintaining technological dominance

Third, the deep-rooted contradictions of the strategic game

1. Contest for technology control: The U.S. demand for technology transfer and localized R&D is in fundamental conflict with TSMC's principle of "keeping R&D roots in Taiwan".

2. The paradox of industrial subsidies: The U.S. government's demand for excessive profit sharing creates a gap between the expectations of companies and the long-term subsidies they expect.

3. Talent competition: The U.S. attempts to absorb Taiwan's team of engineers, shaking the manpower foundation of TSMC's core competitiveness.

Fourth, the future evolution of the trend of judgment

1. Risk of technology proliferation: The U.S. may gradually penetrate advanced process technology through equipment control, patent barriers and other means.

2. Migration of the center of gravity of production capacity: After 2026, the U.S. domestic advanced process production capacity may reach 15% of the world, changing the industry's geographical pattern.

3. Escalation of the cross-strait game: TSMC's strategic choice will deeply affect the technological dimension of the China-US-Taiwan triangle.

The game is essentially a microcosmic representation of the struggle for industrial sovereignty in the post-globalization era.TSMC's strategic choice to walk a tightrope between safeguarding its commercial interests and responding to political pressure not only concerns the survival of the company, but also the reshaping of the global semiconductor industry.Its ultimate direction may define a new order of technological power in the digital economy.

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