Taipei’s economic forecasters are staring at a blank space on the page. The uncertainty is the point.
Tsai Yu-Tai, director-general of Budget, Accounting, and Statistics in Taiwan, did not give a precise number when he briefed reporters on the island’s economic prospects. He could not. The scale of the impact, he said flatly, is yet unclear. What is clear is the source of the fog: the United States has decided to build its own chip factories, and Europe is following suit.
The Chips and Science Act, passed in August 2022, is the engine of that shift. It is a US$50 billion package. That money is not going to Taiwan. It is going to domestic American research and development. The Biden administration framed it as a strategy to overtake Beijing as the leading chip producer and to secure supply chains against geopolitical instability. For Taiwan, the framing is a problem. The island’s economy runs on the global demand for semiconductors. Taiwan Semiconductor Manufacturing Co. is the crown jewel of that industry. When Washington and Brussels decide they want their own crown jewels, Taipei worries.
Tsai stated that the newly approved US regulation and the similar European proposal may directly and indirectly harm exports of important industries in Taiwan. He did not mince words. The uncertainty from these measures, he said, will impair Taiwan’s production and exports. That is a blunt assessment from the man charged with counting the nation’s money.
The core of the controversy is a strategic shift. The United States is deliberately trying to reduce its reliance on Asian suppliers. Taiwan is the specific target of that effort. The Chips and Science Act formalized a policy that had been whispered about for years. Now it is law. The goal is to accelerate Washington’s objective to overtake Beijing as the leading chip producer. That is a direct competition. Taiwan sits in the middle of it.
Taiwan’s officials voiced significant apprehension on December 4, 2022. That was the date the concerns became public. The reason for the anxiety is straightforward: an export-driven economy does not thrive when its biggest customer starts building its own factories. The chips produced in Taiwan are the lifeblood of global electronics. The United States wants to stop relying on that blood supply.
The European Union is moving in the same direction. A similar regulatory framework is being introduced there. That means two major markets are simultaneously trying to shift production away from Asian suppliers. Taiwan is the main Asian supplier in question. The island’s economy is not diversified enough to absorb that hit without pain.
Tsai did not predict a recession. He did not predict a boom. He predicted uncertainty. That is the worst thing a forecaster can say. It means the models do not work. It means the old assumptions are dead. It means the blank space on the page is not a temporary glitch. It is the new reality.
The Chips and Science Act is worth US$50 billion. That is a lot of money. It is enough to build factories, hire engineers, and buy equipment. It is not enough to replace Taiwan’s semiconductor ecosystem overnight. But it is enough to start the process. The question for Taipei is how fast that process will accelerate. The answer, for now, is unclear.
The Biden administration’s strategic effort to lessen reliance on Asian suppliers is not a secret. It is a policy. It is a law. It is a plan. Taiwan’s officials are reading the same headlines everyone else reads. They just have more to lose.
