TSMC's Soft Power: Crafting an America-Friendly Narrative
TSMC's Soft Power: Crafting an America-Friendly Narrative
Huawei Mate 60, delays at TSMC's Arizona fab and how TSMC manages its reputation in the US and balances the complex tech, regulation and geopolitics in the global semiconductor showdown
TSMC has become a vital part of the U.S.‘ technology innovation narrative, and the planned TSMC Arizona fab is a touted success under the current administration. Semiconductor supply chains, innovation, and national security are the official talking points.
My debut op-ed for Financial Times Chinese last year unpacked the then newly passed CHIPS and Science Act. I focused on President Biden's claim that the Act would bolster national security by reducing dependence on foreign semiconductors and redirecting taxpayer investments into core technology areas. The CHIPS and Science Act is a significant move towards re-industrialization, reflecting a consensus among US policymakers and industry leaders to upgrade America’s existing infrastructure technology and to work with allies to make America self-sufficient again.
The passing of the CHIPS Act marked the beginning of TSMC's ascent to become a household name.
Fast forward a year, and TSMC is synonymous with America’s stronghold as a technological superpower. TSMC’s commitment to building a $40bn fab in Arizona is a token of assurance. It’s going to hire and train more than 1/10 of the promised jobs to be created under the CHIPS Act.
But it’s not putting all its eggs in the American basket, and TSMC is pandering to keep its messaging relevant for both the U.S. and global audiences and treading the fine line of supporting an “America-first” narrative.
Why do we care about TSMC now?
TSMC's fabs are so crucial that many see control over them as essential for national survival. Huawei's recent release of the Mate 60, featuring scaled production of the 7nm chip—a technological edge long held by TSMC—demonstrates that replicating TSMC's advanced manufacturing is challenging but not impossible, especially with ample determination and less concern for labor and cost.
Even if the chip powering Mate 60 proves to be manufactured by a Chinese homegrown fab, it is unlikely for any company to disrupt TSMC's market leadership in advanced technology nodes. On the other hand, despite the export controls in place, these chip advancements suggest that emulating TSMC's manufacturing expertise on a smaller scale is not out of the question.
In addition to the Huawei news, TSMC has been on a media blitz to reassure its commitment to America, in part as a response to news of revenue-altering delays at the Arizona fab, systemic talent shortage, and subsidy negotiation challenges.
Morris Chang, founder of TSMC and godfather of modern semiconductors, was rolled out for an interview with NYT to make it clear that “he identifies as American” and went as far as to say “China can’t really do anything if we want to choke them.”
He walked back a bit later in the article:
Like many, he worries about a potential conflict between the United States and China over Taiwan, though he believes the chance of such a confrontation is low.
“The chance of China invading Taiwan, amphibious warfare and all that stuff, I think that’s a very, very low probability,” he said. “A blockade of some kind, I think I still put it as low probability, but it’s still a chance and I want to avoid that.”
Mr. Chang said he was not worried about U.S. policies that have cut off Chinese firms from access to cutting-edge semiconductor technology.
“I think it’s still OK,” he said, though he noted U.S. companies would lose business and China would find ways to fight back.
It’s mind-boggling to me that the complex landscape of global diplomacy and advanced technological partnerships hinges on the efforts of this nonagenarian and another centenarian.
TSMC's deeply interdependent relationship with the US underscores the company's vested interest in maintaining a positive image. Apple constitutes more than 23% of TSMC’s revenue and is expected to be a top customer for the new US fab.
However, the disparity between optimistic projections and the unfolding reality is hard to ignore. TSMC initiated construction on its Fab 21 phase 1 in April 2021, with the goal of chip production by early 2024. The company now plans to start production in 2025 due to equipment delays and talent shortages.
Meanwhile, in Japan, construction on TSMC’s first Japan fab will finish as planned this month, and the total employee count will reach 1700 people. The scale is around the same as TSMC’s one of the planned two factories in Arizona.
If Japan could successfully complete its semiconductor facility on schedule, what's holding back the U.S. from doing the same with its Arizona fab? Morris Chang had already foreseen these challenges last year.
The Saga of TSMC’s Arizona Fab
When I wrote "TSMC's 'American Dream' and Political Maneuvering" following last year's Arizona "tool-in" ceremony, Morris Chang's stance offered a striking counterpoint to TSMC's current, much more optimistic perspective. His words and tone are cautious, foreshadowing the challenges ahead in reviving America's semiconductor industry—a prediction that is gradually becoming reality.
Yet, despite its significance, both American and Western media largely overlooked Chang's speech. Notably, Fox News streamed the entire event, even dedicating 17 minutes to President Biden's arrival and handshakes, but conspicuously omitted Morris Chang's entire remark.
(For complete transcription and analysis, head over to Kevin Xu’s excellent substack.)
It’s perfectly understandable why the White House and TSMC communications team might not have wanted the speech to be included. At the core of Morris Chang’s remarks was this:
“Globalization is almost dead; free trade is almost dead.”
… the end of beginning…
…the romance of the beginning is gone; the initial excitement is gone. A lot of hard work remains…”
Twenty-six years ago, Morris Chang tried to build a semiconductor factory known as Wafertech, which faced similar obstacles to those TSMC is currently experiencing with its Arizona facility. Back in 2020, the US Department of Commerce issued rules to restrict Huawei further, and TSMC lost Huawei, its second-largest customer accounting for 14% of revenue.
From the US vantage point, the issue is the execution of the CHIPS act and communicating it well. Specifically, creating jobs and boosting core long-term competencies. The key is to present current challenges not as systemic talent and capability challenges but as ramp-up issues. Phoenix's mayor has become a de facto spokesperson for TSMC talking enthusiastically to the media about the jobs TSMC will help her create.
TSMC will continue to juggle the delicate balance of being “global,” having a significant China presence, but still playing by the rules set by the U.S. TSMC’s ESG strategy will need to adapt to U.S. norms (calligraphy and seal-carving competition won’t cut it…).
While preserving its Taiwanese roots, TSMC also reinforces its commitment to the US, effectively Americanizing the 'T' in its acronym. Central to its communications strategy is the claim that the unparalleled efficiency of its "fabs corridor" on Taiwan's west coast offers a unique competitive edge that can't be duplicated elsewhere. With this thesis and the fact that chip manufacturing in the United States can be up to 50% more costly than in Taiwan, it’ll be interesting to see how TSMC reconciles the facts in its broader narrative.
There is a saying in Chinese “一碗水端平” (Yī wǎn shuǐ duān píng). The literal meaning is balancing a bowl of water, and it is used metaphorically to highlight the need for a reasonable and impartial approach.
Morris Chang congratulated Chinese President Xi Jinping on the success of the 20th National Congress of the Communist Party of China at the Economic Cooperation (APEC) Economic Leaders' Summit in Thailand. He had to clarify to reporters at a later event that the exchange was entirely his own decision (as opposed to representing the official position of Tsai Ing-wen’s administration).
Let’s hope the bowl water will remain in equilibrium in the foreseeable future.