US-China tech war: Beijing calls on Washington to stop further dialogue with Taipei on supply chain resilience, semiconductors

The second annual economic dialogue between Washington and Taipei focused on issues that include supply chain security and semiconductors
Taiwan economic affairs minister Wang Mei-hua also asked Washington for government subsidies to support Taiwanese firms doing business in the US

China technology

Che Panin BeijingandCatherine Wong

Published: 11:00pm, 24 Nov, 2021

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China has urged the United States to stop further official contacts with Taiwanese officials, after representatives from Washington and Taipei held their second annual economic dialogue earlier this week.

The call was made by Chinese foreign ministry spokesman Zhao Lijian on Wednesday, following the two sides’ five-hour virtual discussion, which focused on such issues as supply chain resilience, digital economy, science and technology and 5G network security, as well as Beijing’s economic coercion.

The meeting on Monday, billed as the second “US-Taiwan Economic Prosperity Partnership Dialogue”, marked the latest sign that US President Joe Biden’s administration intends to continue developing closer ties with the democratic island, which mainland China refers to as a renegade province, amid soaring tensions with Beijing.

It was also convened days after Beijing’s semiconductor self-sufficiency drive faced fresh headwinds, as Washington moved to block South Korean memory chip giant SK Hynix from shipping advanced chip making equipment to mainland China. The US government also thwarted Intel Corp’s plan to expand its manufacturing operations on the mainland.

The stakes are high for Beijing because Washington has already managed to get industry giants Taiwan Semiconductor Manufacturing Co (TSMC) and Samsung Electronics to invest in the US with new chip production operations.

“Taiwan wants to exchange its expertise in semiconductors for opportunities to cooperate with the US in the areas of 5G, AI and automobile electronics,” said Arisa Liu, senior semiconductor research fellow at the Taiwan Institute of Economic Research.

Economic affairs minister Wang Mei-hua, who led the Taiwanese delegation in the economic dialogue with the US, said on Monday that the two sides agreed to promote supply chain security and cooperate on pharmaceuticals, health, clean energy and semiconductors amid a global chip shortage.

Wang also said that Taipei asked Washington for government subsidies to support Taiwanese companies in the US, according to a report from Central News Agency, the island’s official media.

In August, an Arizona economic development group said it made a deal with Taiwanese economic development officials to make the US state more attractive to the island’s semiconductor industry, as the world’s biggest chip maker TSMC eyes a US$12 billion plant in Phoenix.

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In addition to “countering economic coercion”, the talks also focused on supply chain resiliency, “promoting the digital economy, strengthening 5G network security, and advancing collaboration in a variety of science and technology fields”, said the US State Department in a statement.

Meanwhile, cooperation between Beijing and Taipei is expected to depend on mutual trust between the two sides, according to semiconductor research fellow Liu. She indicated that the mainland Chinese market has huge potential, which no Taiwanese hi-tech company – especially in the semiconductor sector – would ignore.

Taiwanese engineers, for example, have played a major role in helping develop the mainland’s semiconductor manufacturing industry. China’s top foundry, Semiconductor Manufacturing International Corp, was founded by Taiwanese entrepreneur Richard Chang Rugin.

Still, mainland China has largely focused on mature chip technologies that are not subject to US trade sanctions.

“There is no realistic prospect of China being able to match the capabilities of the global leading-edge semiconductor manufacturers in the next few years,” said Tilly Zhang, a researcher at Gavekal, in an industry note this week.