Taiwan Eyes Strategic High-Tech Partnership with US for Growth

Taiwan is pursuing a strategic partnership with the United States aimed at boosting high-tech investment, according to Vice Premier Cheng Li-chiun. During a news conference in Taipei, she updated reporters on discussions with Washington, emphasizing Taiwan’s potential role in enhancing US production capacity without relocating supply chains.

The initiative comes as Taiwan seeks to reduce the 20 percent tariff imposed on its exports to the US, which has created a significant trade surplus. Cheng is leading the negotiations on tariffs and expressed optimism about reaching a consensus that would foster investment through a proposed “Taiwan model.” This model focuses on “industrial investment planning” backed by government support, including export credit guarantees and the joint development of industrial clusters.

Investment Strategy and Expectations

In outlining the strategy, Cheng indicated that the government would allow corporate owners to select the industries for investment. Following these decisions, the government would then provide financial support to encourage further investments. She noted that while Taiwan’s science parks are unique, the nation is willing to share its expertise to help develop industry clusters in the US.

The Vice Premier clarified, “This does not mean we are moving Taiwan’s science parks to the US.” To facilitate the establishment of these clusters, she urged the US to provide essential infrastructure, including land, utilities, and services, as well as streamlined visa processes and legal frameworks. These elements are crucial for expediting the formation of corporate investment plans and local supply chains.

Taiwan’s discussions with the US also encompass tariff rates, with Cheng reaffirming the position that tariff rates would not be cumulative. Both nations are exploring preferential rates for semiconductors and related products, which are part of the discussions under Section 232 of the US Trade Expansion Act of 1962.

TSMC’s Role and Future Investments

As the world’s leading contract chipmaker, TSMC plays a vital role in Taiwan’s high-tech ambitions. The company is currently investing US$165 billion to establish chip manufacturing facilities in Arizona. Despite this expansion, the majority of TSMC’s production activities will remain in Taiwan.

Cheng clarified that TSMC did not participate in the latest round of negotiations and reiterated that a proposal for a “50-50 split” in chip production, suggested by US Secretary of Commerce Howard Lutnick, was not discussed and would not be acceptable to Taiwan. “Our aim is to remain rooted in Taiwan while deploying globally and fostering bilateral cooperation,” she stated.

Taiwan is seeking three primary concessions from the US: a reduction in tariff rates, comprehensive preferential treatment for semiconductors and related products, and improved investment opportunities within the US. The current tariff policy, which took effect on August 7, 2023, has set Taiwan’s provisional tariff rate at 20 percent.

Five rounds of talks have occurred this year, beginning with a video conference on April 11, followed by meetings on May 1, June 25, and July 8. The most recent discussions took place from late July to early August and continued into the following week.

As Taiwan forges ahead with these strategic negotiations, the outcome may significantly influence both nations’ economic landscapes and their roles in the global high-tech sector.