The U.S. and Taiwan have inked a major trade agreement centered on semiconductor products. Under the deal, import tariffs for exports entering the United States have been revised and significant investments from Taiwan will be channeled into chip manufacturing in the U.S.
The U.S. has lauded this deal as something that will boost semiconductor manufacturing on U.S. soil while also ensuring that critical supply chains are protected. The deal lowers tariffs on Taiwanese semiconductor products from the current 20% to a lower level of 15%, which aligns with the rates being levied on other exports originating from the Asian region.
This deal opens the way for Taiwanese firms with operations in the U.S. to enjoy even lower tariff rates. In some cases, such companies will be exempted from any applicable tariffs as they import key materials and equipment for the plants they are constructing in the United States.
A key feature of the agreement reached is the commitment of Taiwanese companies to invest significant amounts of money into the semiconductor, AI and energy industries within the U.S. A minimum of $250 billion has been earmarked for these investments, and the government of Taiwan has committed another $250bn as credit guarantees towards companies that take part in the investment drive agreed upon with the U.S.
Taiwan is framing the terms of this agreement as a move that will “democratize” the flow of high-tech products between Taiwan and the United States, especially with regard to cutting-edge AI technologies and chips. They emphasize that production isn’t being shifted to the U.S. but is instead being expanded to include additional facilities in North America.
Many leading semiconductor companies in Taiwan have already revealed plans that align with this pact signed with the U.S. For example, GlobalWafers, a Taiwanese company that fabricates silicon wafers, operates a manufacturing facility in Texas. The company announced plans to begin another phase of its expansion plans in order to meet the growing demand of these wafers within the U.S. tech industry.
The U.S. has increasingly leaned on tariffs as a way to expand its manufacturing capacity and the semiconductor industry is one of the major industries that are being reshaped by this approach. It remains to be seen to what extent major players in the semiconductor industry like Taiwan Semiconductor Manufacturing Company Ltd. (NYSE: TSM) can make further tweaks to their investment plans as a result of this pressure from Washington. What is in no doubt is Taiwan’s reluctance to surrender its position as a global leader in semiconductor manufacturing.
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