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Taiwanese Chipmaker Facing Pressure To Produce Chips In US

Amit Nag

The U.S. government is pressing a Taiwanese chipmaker to manufacture chips in the United States.

What Happened

Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM), one of the world's top contract chipmakers, is under mounting pressure from the Trump administration to make chips in the U.S., sources told the Nikkei Asian Review.

Military-grade chips made by TSMC, which is a key supplier to tech giants like Apple Inc. (NASDAQ: AAPL) and Huawei Technologies Co. Ltd., are used in several American aircraft, including the F-35 jets.

“The U.S. government wants chips that go into military projects to be built on American soil,” a senior Taiwanese government official told The Nikkei.

“That's for national security concerns, and they (the U.S.) don't plan to back off on that," the official added.

Why It Matters

The United States has made it a priority to avoid using Chinese technology and surveillance to manufacture high-security components, such as memory chips, to prevent any possible Chinese interference.

Officials from the United States Department of Defense earlier contacted TSMC's U.S. customers to check on the security implications of overseas chip manufacturing. 

TSMC, at the time, assured their U.S. clients that the company makes semiconductor chips in compliance with the U.S. government's security mandates.

U.S. offices had several meetings with TSMC before last week’s election in Taiwan, while China-skeptic President Tsai Ing-Wen was re-elected in the country.

"We've noticed that many U.S. tech executives and government officials are concerned about their country's dependence on TSMC and the security of their defense industry's supply chains," said director of Taiwan's Institute for National Defense and Security Research, Su Tze-yun.

"That's why the U.S. constantly hopes that TSMC could stand with them to make chips somewhere else other than just Taiwan, which they think is not completely safe because China has not ruled out the possibility of taking control of the island by force," added the director.

44% Rise In Revenue Expected

TSMC is expecting its first-quarter revenue to reach $10.2 billion-$10.3 billion, compared to $7.1 billion a year ago, a 44% rise.

Increasing demand for 5G smartphones could dial up profits in the period between January and March, despite the possibility of new U.S. restrictions on its Chinese clients.

"Whatever export controls are coming up we think 5G momentum will continue and the interruption will be very short term," said TSMC Chairman Mark Liu to investors and reporters in Taipei.

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