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If the US imposes new sanctions, a top economist urges China to seize TSMC

If the US imposes sanctions on China similar to those imposed on Russia, a top Chinese economist at a government-run think tank has urged for the seizure of Taiwan Semiconductor Manufacturing Co.

“We must recapture Taiwan if the US and the West put harmful sanctions on China similar to those imposed on Russia,” said Chen Wenling, chief economist of the China Center for International Economic Exchanges. The National Development and Reform Commission, China’s primary economic planning organisation, oversees the study group.

“We must seize TSMC, especially in the restoration of the industrial chain and supply chain,” Chen said in a speech given last month at Renmin University’s Chongyang Institute for Financial Studies, which was republished online Tuesday by the nationalistic news website Guancha.

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“They are speeding up the transfer to the US to build six factories there,” she added. “We must not allow all of the transfer’s objectives to be met.”

The remarks are among the most prominent to date, demonstrating how Taiwan’s chip industry is viewed in Beijing as a significant strategic asset in the world’s two largest economies’ increasing competition. TSMC is the world’s largest contract semiconductor maker, accounting for more than half of the global foundry industry (companies that only make chips for other firms). Apple Inc., which uses Taiwanese semiconductors in its iPhones, is one of its customers.

Chen’s comments were met with silence from a TSMC spokesperson. According to media sources, TSMC plans to develop six semiconductor fabs in the United States, but the company has only announced one so far. It has purchased extra land in preparation for future construction.

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Given that the US and other countries only imposed strong economic sanctions on Russia after it invaded Ukraine in February, it’s unclear how Chen’s scenario would play out. Taiwan is claimed by Beijing as part of its territory, which must be brought under control by force if necessary, while Taipei claims to be a de facto independent nation in need of international recognition.

President Xi Jinping has pledged to attain technological self-sufficiency, and has appointed Liu He, China’s economic czar, to lead a crucial project aimed at assisting domestic chipmakers in overcoming US sanctions. Longer-term efforts by chipmakers such as Huawei Processes Co.’s HiSilicon and Semiconductor Manufacturing International Corp. to migrate to more advanced wafer fabrication technologies are being hampered by the sanctions, which were imposed under Donald Trump’s presidency.

At the same time, as part of the administration’s sweeping China competition measure, which is still awaiting approval, President Joe Biden announced intentions to invest $52 billion in domestic semiconductor research, development, and manufacture.

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