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Following the semiconductor summit convened by the White House on September 23, leading chip makers like TSMC and Samsung have become increasingly concerned that the U.S government is demanding confidential information related to their supply chains and capacities. 

Apart from TSMC and Samsung, participants of the summit also included Apple, Microsoft, Intel, GlobalFoundries and BMW. Reportedly, the U.S. Commerce Department has been trying for months to obtain such supply chain-related details, in a bid to identify the underlying causes leading to the global chip shortage, which in turn has severely undermined the U.S. auto industry. The demand met much resistance from chip makers, prompting the Commerce Department to resort to more aggressive measures. 

Cold War-era law back on the table

Gina Raimondo, Secretary of Commerce, declared that the situation was not getting better, and more aggressive measures were needed to alleviate the bottlenecks. Specifically, Raimondo didn’t rule out the possibility of using the Defense Production Act to ensure compliance. The Act was passed at the start of the Korean War, giving the U.S. President a wide set of powers to control the domestic economy, including the power to set prices, relocate materials, and redirect private companies to prioritize federal government orders. 

Despite its Cold War origin, the Defense Production Act has been continuously re-authorized by the U.S. Congress, the latest by President Biden to speed up Covid-19 vaccine production. Back in May 2021, some U.S. lawmakers and automakers already called on the government to invoke the Act, in order to redirect scare computer chips to car production, At the time, however, the government was concerned by its implications to other critical industries like consumer electronics. Others likened it to a total disaster for supply chain management.

An alarm bell for both allies and adversaries 

At the current stage,  companies have to submit the demanded information by November 8. They include details such as inventory data, client lists, monthly sales by product, and even the types of chips. For TSMC and Samsung, such level of disclosure might affect their abilities to negotiate prices, and even lead to contract cancellations. Non-US companies are especially wary if such information could be passed onto their American competitors. 

The implications are particularly serious for TSMC, the successful business model of which partly depends on strict client confidentiality. TSMC’s long-time neutrality has also contributed to its market position today, as it treads a careful line in a world bifurcated between the United States and China. This very neutrality has given TSMC its outsized role in the global technology industry, which in turn largely underpins Taiwan’s international soft power. In this sense, the U.S. demand risks constraining Taiwan’s geopolitical manoeuvring space, and indirectly forcing it to choose a clear side in the Sino-American tech war.

For United States’ geopolitical rivals, such as Russia and China, White House’s demand also sounds an alarm bell. For example, Unisoc, China’s up and coming chip design house that might take Huawei/HiSilicon’s mantle as the country’s chip champion, uses TSMC’s advanced manufacturing processes. Likewise, some of Russia’s latest Elbrus processors, key to its own chip autonomy program, were also manufactured by TSMC.



Reference: Bloomberg, Business Korea, TechNews