Summarize this content to 2000 words in 6 paragraphs in Arabic It is a coincidence that Taiwan’s deputy economy minister Cynthia Kiang arrives in Washington on Tuesday, just as Taiwan Semiconductor Manufacturing Co’s board meets for the first time in Arizona.But the goal of Kiang’s talks with US officials is very similar to that of board meeting at TSMC’s huge new Arizona chip complex: to minimise the threat posed by tariffs planned by US President Donald Trump.While governments and corporates worldwide are scrambling to adjust to the US president’s enthusiasm for erecting trade barriers, few have as much at stake as Taiwan and its flagship chip manufacturer.Trump wants to tax imported semiconductors and dismantle an incentive scheme under which Washington agreed to subsidise TSMC’s pledged $65bn investment in US production capacity with grants worth $6.6bn.“In the very near future, we’re going to be placing tariffs on foreign production of computer chips . . . to return production of these essential goods to the [US],” Trump told House Republicans on January 27.“They left us and they went to Taiwan . . . and we don’t wanna give them billions of dollars like this ridiculous programme that Biden has,” he said, adding that foreign chipmakers “didn’t need money, they needed an incentive. And the incentive is gonna be, they’re not gonna want to pay a 25, 50, or even 100 per cent tax”.Trump has also suggested that TSMC — which controls more than half of the global market for made-to-order chips — “stole” the business from the US. And he has accused Taiwan’s government of relying on US security support without paying for it.The views of Howard Lutnick, Trump’s nominee for commerce secretary, are also not reassuring for Taiwan and TSMC. At his nomination hearing last month, Lutnick said TSMC had “leveraged” the US to take chip manufacturing. “We are too reliant on Taiwan, we need to have . . . that production in [the US],” he said. Such sentiments strike at the heart of Taiwan’s sense of security. TSMC’s leadership of global cutting-edge chip manufacturing is widely seen as ensuring Taiwan’s importance to the US — and Washington’s backing against the threat of annexation by China.Kuo Jyh-huei, Taiwan’s economy minister, suggested last Saturday that the delegation led by his deputy Kiang would “try to explain things more thoroughly to our US friends”.This includes the fact that TSMC customers that specialise in designing chips gain a much larger profit share than the manufacturer does — and operate without the risks that stem from its enormous capital investments in fabrication plants, Kuo said.Technology industry experts said the notion that Washington could coerce TSMC with tariffs into moving most of its operations to the US was illusory and based on ignorance about the chip industry.Although 70 per cent of TSMC’s revenue came from North America last year, “very few chips go [directly] to the US”, said Dan Nystedt, vice-president at TriOrient, an Asia-based private investment company. “Most will be shipped to China, India, etc, placed inside iPhones and servers, and then shipped to the US.”Since US tariffs normally apply to finished products rather than subcomponents, it would be “tricky” for US customs to target the overwhelming majority of the chips TSMC makes for US customers, analysts suggested.But Trump tariff policies have already had an impact on Taiwan’s exporters. The first shot in his new trade war — a 25 per cent tariff on all imports from Mexico and Canada that was announced on February 2 but then postponed until March 1 — has already forced Taiwanese groups such as Foxconn and Quanta Computer to consider shifting again the production lines that churn out the lion’s share of the world’s servers.When Trump slapped tariffs on a wide range of technology imports from China in his first term, server manufacturers shifted a sizeable portion of their assembly operations to Mexico. “Depending on the final tariff levels, we could shift some of that into the US, or elsewhere,” said an executive at one Taiwanese contract electronics manufacturer.Trump’s approach has spooked companies in Taiwan’s chip sector, too. Rick Tsai, chief executive of MediaTek, the country’s leading chip design house, told investors last week the company was running simulations of the impact of US tariffs, but their effect was “very unpredictable”.TSMC’s management faces a delicate balancing act.On the one hand, the company has to convince Trump to honour the Biden administration’s subsidies deal, which it needs to make its Arizona investment plans feasible. On the other, TSMC executives believe moving too much production to the US would undermine its business model and prove politically too difficult back home.“The company needs to be as sensitive to the Taiwan government as it is to the US government and US companies,” said a person close to TSMC. A critical sticking point is TSMC’s Taiwan-based global research and development centre. The company has long been able to quickly scale up production at each new generation of processing technology while maintaining high yields, or the proportion of chips produced without defects. It credits much of this success to its practice of sending research engineers to the fab floor to tweak the tools.Managers believe neither moving R&D to the US nor setting up a parallel R&D organisation there are options.Analysts said that as a compromise, TSMC could accelerate the timetable for its Arizona plants to bring advanced technology to the US and possibly commit to additional investment. The company’s first Arizona plant is in commercial production with 4 nanometre chips, one generation behind the most advanced technology used in mass production in Taiwan. It has pledged to bring 2nm chip production to the US in 2028, about two years after its start in Taiwan, and to bring a third fab online in Arizona by 2030.The board could also decide to build capacity in the US for advanced packaging, a fabrication phase crucial to the most advanced chips that TSMC has kept in Taiwan, people familiar with the company said.While that would increase TSMC’s commitment to the US, it would still keep Taiwan as the epicentre of global chip manufacturing.Observers believe TSMC’s US customers will have to help convince Washington that such moves are enough to justify holding off on the tariffs. “Apple and Nvidia and other chip designers, they would bear the brunt [of chip tariffs],” said Nystedt.
