Is the U.S.-Taiwan Chip Alliance Against China Viable?

The gist of President Tsai’s pitch was that Taiwan Semiconductor Manufacturing Company (TSMC), a giant global producer of computer chips that accounts for 60 percent of the world’s semiconductors and 92 percent of cutting-edge chips, is vitally important to China, the U.S., and the global economy and gives Taiwan leverage. Furthermore, the U.S. State Department published a report saying that a Chinese blockade of Taiwan, because of the importance of TSMC, would cause a $2.5 trillion loss in the annual world economy.

The upshot was that Taiwan being a democracy and the world’s pre-eminent chip maker, America must commit to defending Taiwan against an invasion by China to end its century of humiliation and make China whole.

To rectify his policy, in September last year, President Biden declared a “tech war” against China while proposing legislation calling for spending billions for fabrication facilities in the U.S. to fix its decline from 37 percent in 1990 to 12 percent now in making chips in America.

Biden subsequently pressured Holland and Japan, important producers of advanced chips, to join his effort to defeat China in his “chip war.”

President Biden’s “call to arms” with China in his crosshairs obviously had some impact. China felt it. But was it enough to be able to win a tech victory over China?

A considerable amount of evidence suggests President Biden is not winning his crusade against China.

First off, it’s Biden’s contention that, related to the chip war, China intends to destroy the liberal world order the U.S. created after World War II—a rules-based system to create global peace and prosperity (which it did). And the West must unify to stop it.

However, the fly in the ointment is that the American global order is now in a steady state of collapse, according to Richard Haass, president of the Council on Foreign Relations, which incidentally publishes Foreign Affairs. And his view is seconded by U.S. diplomacy sage Henry Kissinger. The main reason is that the U.S. can no longer sustain it.

Also, in past centuries, the Chinese global system operated in China’s known world, East Asia, was founded on China’s economic and technological preeminence and is now making a comeback. Many observers think it is a morally preferred system compared to America’s, based on military power and characterized by endless wars.

Anyway, when President Biden sojourned to Europe to gather support for his view of a world divided along democratic versus authoritarian lines, with the U.S. leading the former and China the latter, most European countries were not of the mind to join America in fighting another of its many wars or sacrifice critical commercial relations with China.

The question is whether the United States can find allies to promote its worldview against China and whether it can pay for it. At its quadrennial conference in October, top officials of the Chinese Communist Party decided to advance China’s technology to new heights. They said that twice as frequently as at the previous conference and followed this up by allotting $143 billion to the effort. That was more than President Biden’s proposal, and he must worry it will cause further inflation—a problem that, comparatively speaking, did not beset China.

There were other inconvenient facts: China has 8 to 10 times the number of students graduating in STEM fields each year than the United States. It also owns a decision-making system that is faster and more efficient than Biden’s.

Back to Taiwan and President Tsai’s view…. A collection of local elections in Taiwan in November 2022 was telling regarding the viability of Taiwan’s alliance against China. President Tsai’s party, the DPP (Democratic Progressive Party), suffered a shellacking, owing, pundits said, to her constant demonizing of China to help her party win. Voters perceived she was provoking tension with China for partisan gain and not attentive to local problems.

After the election, many pundits anticipated that the KMT (Nationalist Party), which is not hostile toward China, would win the coming presidential election in January 2024. Meanwhile, polls in Taiwan showed that residents felt that unification was inevitable, given China’s rise and America’s decline.

Looking ahead, anticipated economic growth in the U.S., China, and Taiwan is revealing.  An Economist publication (The World Ahead 2023) forecasted that America's GDP growth in 2023 would be a mere one-half of one percent. In contrast, China's growth was projected to be nine times larger, while Taiwan's GDP growth was expected to be one-third of China's. The International Monetary Fund made similar predictions.

President Biden also had to worry that the House of Representatives, which the Republican Party controlled as of the November U.S. election, would trammel his ability to spend. Worse, it was in the process of investigating the Biden “criminal family.”

In the meantime, Biden’s popularity had cratered.  Hence, most Democrats did not want him to run for president again. Some even questioned whether Biden’s economic war against China would last or was even being seriously pursued because the feud was hurting America. Also, U.S.-China trade grew in 2022, contrary to U.S. policy.

Thus, whether Biden and Tsai’s alliance would last, it was discredited in Taiwan by the U.S., forcing TSMC to invest in a plant in the U.S. with an investment cost of $12 billion. Many residents in Taiwan were dismayed by Washington weakening Taiwan’s silicon shield and thus not acting in Taiwan’s interest.