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US Officials Pressure TSMC To Bring Chip Production Stateside

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US officials are now putting pressure on Taiwanese chipset manufacturer TSMC to move some of its chip production stateside. That’s according to unnamed sources who recently spoke with Nikkei Asian Review. The sources are said to include at least one senior Taiwanese government official, who had direct knowledge of the US government’s “approaches.”

TSMC is presently the world’s largest contract semiconductor manufacturer, so it won’t necessarily be moved to comply. But the United States also makes up 60% of TSMC’s sales, with just one subsidiary — WaferTech — operating in the US. The overwhelming majority of TSMC’s production takes place in Taiwan.

That puts an enormous amount of pressure on TSMC and the US has reportedly been adamant about moving chip production. “They don’t plan to back off on that,” according to the source.

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What chip production does the government want TSMC to move to the US and why?

The growing tension between the US and TSMC is the result of security concerns surrounding chips used by the government. The tech giant is responsible for computer chips used in American F-35 fighter jets as well as those used in satellites. It is also a primary supplier for American companies such as Apple, Google, and Qualcomm.

It is those high-performance chips that are typically built for and shipped to U.S. military suppliers such as Xilinx that the government wants to see production moved for. More directly, U.S. Defense Department-approved “military-grade” chips are at the center of the pressure being placed on TSMC by the government.

The production also includes some chips that are sometimes used by American clients for classified military purposes, highlighting at least one reason why the US wants chip production moved. Not only does TSMC build chips that serve deeply secretive military purposes, it’s responsible for 50-percent of the world’s chip foundry business. That includes some perceived competitors such as Huawei.

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The concern is that the Chinese company or other Chinese influence will impact the chips themselves. Worries are centered around how secure the chips and the production of those chips will be. Huawei was placed on a watch list by the Trump administration last year, preventing interaction with most US companies over similar concerns. That forced the company to make some momentous changes to its company and products.

Will TSMC comply?

Whether or not TSMC will comply with the demand may not be ascertainable just yet. The company did repeatedly say over the past year that it wouldn’t rule out working to move production to the US. It could feasibly buy or build new high-specification plants in the US to accomplish that. It has also managed to avoid fulfilling these types of requests in the past. And has said it doesn’t have a “concrete” plan in place.

Conversely, Chinese companies such as Huawei have asked TSMC to move production too. Huawei, in particular, asked TSMC to move chip production to its own $3-billion plant in Nanjing. Chinese clients account for a significant portion of TSMC revenue at around 20-percent. Huawei itself accounts for 10-percent of that revenue.

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TSMC could arguably move production for both Huawei and the US government to eliminate concerns on both sides. But that would spread the company far beyond its usual operations. Moreover, there may be more incentive to comply with Huawei than with the US. The government has not reportedly offered up working space for TSMC to utilize if it does move production of some chips to the US.