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Taiwanese Chips Made in Arizona Is the Future of US Trade

Taiwanese Chips Made in Arizona Is the Future of US Trade

Friday, 27 August, 2021 - 05:15

Taiwan’s world-beating semiconductor company, TSMC, is chartering a container ship to move pieces of equipment to its new factory in Arizona. The move may herald a new era of foreign investment in the US— but only if America plays its cards right. The key will be to see global supply chains as an opportunity rather than a threat.


For decades, the US attitude toward global supply chains has been a defensive crouch. As the internet and a more open global economy made it easier to outsource production, US manufacturers moved their factories overseas — first to places like Mexico and Southeast Asia, then in a huge flood to China. It was this last shock that was particularly damaging to the careers of many American factory workers. That negative experience scarred a generation, and created the popular perception that trade, supply chains and foreign investment were all simply ways for corporate overlords to ditch well-paid American workers for cheaper overseas labor. It was this attitude that caused the Trans-Pacific Partnership trade agreement to be scuttled.


But Taiwan Semiconductor Manufacturing Co.’s $12 billion Arizona factory is a sign that the world has changed from what it was 10 or 15 years ago. Yes, Taiwan’s flagship chipmaker — which by some measures is ahead of Intel Corp. in the race for advanced technology — is a special case. Taiwan is in danger of a blockade should China decide to force reunification with the island, so a factory in the US helps diversify the company against that risk. But the fact that it chose the US instead of a cheaper country like Mexico, or another Asian country like Japan, is encouraging. Unlike former President Donald Trump’s failed plan to put a Foxconn Technology Group factory in Wisconsin, TSMC’s Arizona investment is for real.


Aside from political considerations and Arizona’s cheap land, why did TSMC choose the US? One factor is the availability of skilled labor — chip fabrication is highly automated and mostly employs engineers. American engineers may not put in quite the insane hours that Taiwanese engineers do, but they have a reputation for extreme competence. America has the best universities in the world, and these provide a pipeline of global talent to high-tech manufacturers.


That offers a model that the US can use to recruit more foreign investment. As the country seeks to rebuild its internal supply chains and bulk up capacity to rival China, it can leverage its highly skilled workforce to lure in automated manufacturing — not just semiconductor factories, but industries highly dependent on robotics and other complex tools that require skilled labor to build, operate and maintain. If the US manages to retain its edge in attracting skilled immigrants from around the globe, of course, this will be a much easier task.


Americans who have heard only dire stories of jobs shipped overseas for the past three decades will understandably be skeptical of the country’s chances of becoming a hub of foreign direct investment. But in fact, the US always does pretty well in terms of attracting capital from abroad. In recent years, it was the leader:


Some of this is purchases of property or for natural resource extraction, but manufacturing has always been a substantial part of foreign investment in the US The cars with the most American-made content tend to be Toyotas and Hondas, not Fords or Chevrolets. Making things in the US has always been advantageous for companies who want to be close to their deep-pocketed American customers.


Investments like TSMC’s plant, however, do even more for the US economy. They provide high-value-added exports, bringing more money into the country than a simple auto assembly plant. They also help the US retain its commanding position in technology and promote the potential for locating whole supply chains within the country.


Supply-chain localization is one way plants like TSMC’s create jobs for normal Americans, even though mostly only engineers work at the actual facility. Another way is that the money the plant brings into its local community will be spread around via local service industries. So this investment isn’t just about U. GDP; it’s about jobs too.


Americans need to wake up to the opportunity offered by foreign investments like this. Instead of staying in a defensive crouch against foreign trade, the US needs to be bold and confident about its ability to compete and win in the global economy. This doesn’t mean embracing pure free trade, but it means being deliberate about attracting more investments like TSMC’s. States can improve local education and expand infrastructure like water and transportation, and the federal government can offer various incentives for global companies to relocate here.


This is a game that China played and won; now it’s time for the US to play and win, instead.


Bloomberg


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