What’s Next in US-Taiwan Technology Relations?

What’s Next in US-Taiwan Technology Relations?

What’s Next in US-Taiwan Technology Relations?

Building US-Taiwan Ties

In December 2021, US Secretary of Commerce (DOC) Gina Raimondo and Taiwan’s Minister of Economic Affairs Wang Mei-hua (王美花) announced that the American Institute in Taiwan (AIT) and the Taipei Economic and Cultural Representative Office (TECRO)—in partnership with DOC’s International Trade Administration (ITA) and the Taiwan Ministry of Economic Affairs (MOEA)’s Bureau of Trade (BOFT)—will cooperate through a new Technology Trade and Investment Collaboration (TTIC) Framework that aims to strengthen critical supply chains, including semiconductor supply chains. 

The Commerce Department’s move is a sign that the Biden Administration may seek to continue some of the Trump Administration’s successful policies aimed at deepening ties with Taiwan as a part of a broader free and open Indo-Pacific strategy. Importantly, these moves show a continuation of policies aimed at corralling Chinese influence and strength across all aspects of critical and emerging technologies, with a special emphasis on supply chains. 

Dialogue Tracks

The Biden Administration’s decision to continue Trump-era initiatives such as the US-Taiwan Economic Prosperity Dialogue (EPPD) show how important the US-Taiwan relationship is to US national security and the robust US-Taiwan economic relationship. At the second meeting of the EPPD in November 2021, organized by AIT and TECRO, US Under Secretary of State for Economic Growth, Energy, and Environment Jose W. Fernandez met with Taiwan Minister of Science and Technology Wu Tsung-tsong (吳政忠) to discuss collaboration on critical and emerging technology issues, and their impact on the existing US-Taiwan economic relationship. Specifically, the two discussed countering foreign economic coercion, strengthening 5G network security, and advancing collaboration across science and technology (S&T) fields.

In October 2021, Sandra Oudkirk, director of AIT, emphasized the importance of Taiwan’s role in building “resilient” and “safe” supply chains, stressing the importance of US-Taiwan ties to ensure they remain safe and secure. She also added that in order to do that, some of both the components and products of the supply chain would need to be built on American and other nations’ shores. AIT has played a key role in building up Taiwanese direct investment in the United States, including a Taiwan Semiconductor Manufacturing Company (TSMC, 台灣積體電路製造股份有限公司) plant in Arizona on which the company will spend an estimated USD $12 billion to develop as many as six factories within a ten- to fifteen-year span. 

TSMC’s Role in US-Taiwan Ties

TSMC plays a unique role in the within the US-Taiwan relationship as a “technological powerhouse” and a key provider of components for many critical technology industries. Currently, TSMC produces 92 percent of the world’s advanced chips and is the world’s largest contract chip producer. TSMC’s critical lines of production include national security-sensitive chips for F-35 fighter jets, high-performance chips for US military suppliers, and other Department of Defense (DoD)-approved militarygrade chips, leading to calls from US lawmakers for TSMC to move some of its production capabilities to the US. TSMC’s announcement of its new production facility is a shift in TSMC’s production model, but some national security concerns may remain, especially regarding the threat of intellectual property theft when working with more commercial manufacturers in a “zero-trust” environment. TSMC has taken steps to allay some of these concerns by providing information to the Department of Commerce in accordance with recent export control rules and by stopping the fulfillment of new orders from Huawei (華為) in response to Trump Administration-era export control rules.

The global semiconductor shortage has also had an impact on major US manufacturers that rely on TSMC’s advanced microelectronics, including Apple, Qualcomm, Nvidia, AMD, and Intel. In recent discussions with Taiwan President Tsai Ing-wen (蔡英文), US lawmakers called for Taiwan to work directly with the US, Japan, and South Korea to show a “united front against China” amid shortages in the automotive and consumer electronics sectors. Additionally, industry observers have argued that it would be wise for TSMC to diversify its production, in a manner similar to how it is pursuing production opportunities and shifting some of its critical technology supply chains back to the United States.  

Telecommunications Issues

Another important potential avenue of cooperation that Taiwan and the United States should pursue is further coordination on the development of 5G open radio access networks (RAN). Open RAN networks provide an alternative method for developing, testing, and deploying advanced 5G telecommunications networks that are not reliant on inputs from Chinese companies (namely Huawei). Taiwan represents an excellent opportunity as an export market for US 5G capabilities and ICT companies who specialize in telecommunications hardware. Taiwan and the US have worked in conjunction on these issues for several years, including at an GM Taiwan event which promoted integrated 5G solutions between US and Taiwan companies and a 2021 event showcasing US software solutions for Open RAN technology. The US is currently working with Japan and other Quadrilateral Security Dialogue (Quad) nations (Australia, Japan, and India) on Open RAN technology, and coordination on this issue could be a way for Taiwan to engage the Quad on emerging technology issues. 

Third Country Coordination with Japan

Earlier this year, the 7th Japan-Taiwan Exchange Summit was held in Kobe, Japan. The event was attended by ruling and opposition party members alike from over 70 different governments across Japan. During the proceedings, leaders drafted statements calling for deeper Japan-Taiwan ties in various fields, in line with the proposed draft of a Japanese Taiwan Relations Act. However, mention of technology and technology policy coordination was conspicuously absent from both documents. At the bilateral level, Taiwan and Japan should work towards deeper government-to-government technology policy coordination—including, but not limited to, joint research and development (R&D) programs. Such collaboration could also include efforts to ensure supply chain reliability and stability, particularly in light of China’s growing might in the region, and the inherent security and economic risks that accompany working with US-blacklisted Chinese technology companies like Huawei and Semiconductor Manufacturing International Corporation (SMIC, 中芯国际集成电路制造有限公司). 

Building on these efforts to work in conjunction with the Quad more broadly is another way that Taiwan can augment its influence in developing shared and secure supply chains that are free of potentially dangerous Chinese inputs, protecting national security issues in the process. The September 2021 Joint Statement from Quad Leaders emphasized the importance of developing technology that is in accordance with human rights, rule of law, and democratic values, making free and democratic Taiwan a natural cooperation partner. 

Commercial Ties

Coordinated policy efforts at the governmental level would augment robust developments between Taiwanese and Japanese companies at the commercial level. For example, TSMC has announced it will build its first-ever chip plant in Japan to mitigate global supply chain challenges. Supported by billions of dollars from the Japanese government, this Kumamoto-based facility would focus on the development of 22- and 28-nanometer technology in conjunction with leading Japanese fabricators. Once online, this project is expected to produce 45,000 12-inch wafers per month, marking a shift away from TSMC’s decades-long Taiwan-based production approach. TSMC has also partnered with world-leading Japanese companies to work on 3D semiconductor production through Japan’s National Institute of Advanced Industrial Science and Technology in Tsukuba, Ibaraki Prefecture, which is one of Japan’s leading S&T R&D hubs and was the host city of the 2020 G20 Ministerial Meeting on Trade and Digital Economy. This project will also receive support from the Japanese government.

The United States and Japan have a long history of technology and technology policy coordination at the working- and senior-level, and these relationships present a strong opportunity for third-country cooperation with Taiwan. The 16th Joint Working-Level Committee (JWLC) Meeting on Science and Technology Cooperation between Japan and the United States explicitly recommended working together with third countries on S&T projects and issues. To this end, Taiwan is a natural partner for key issues including secure supply chains of semiconductors and microelectronics, as well as R&D in critical and emerging technology fields such as artificial intelligence and quantum information science. The United States and Japan are also overdue to meet at the ministerial level for the 15th Joint High-Level Committee (JHLC) Meeting on Science and Technology Cooperation. The next meeting of this dialogue would be the ideal setting for the two nations to add a new stream of third-country cooperation with Taiwan in the newly established technology track of the JHLC, especially when it comes to secure supply chains. 

Mitigating China Risks

While TSMC is deepening ties with the US and Japan, even when it comes to national security-specific and defense-related technologies, potential risks to deeper technological ties remain—as, for example, TSMC is also shoring up its production facilities in mainland China. These deeper ties pose potential national security and intellectual property theft risks for sensitive programs and leading-edge technologies that must be addressed as ties between Washington and Taipei (or Taipei and other third nations) grow, especially across national-security specific supply chains. Moves towards security assurances throughout chip production in an assumed zero-risk environment will go a long way toward supporting DoD concerns regarding foreign manufactured components, even with the most trustworthy partners.  

The main point: The Biden Administration appears to be continuing several of the Trump Administration’s successful policies and initiatives aimed at deepening ties with Taiwan as a part of a broader free and open Indo-Pacific strategy. Supply chain diversification and resiliency will continue to dominate key elements of the US-Taiwan technology relationship in 2022.