Why is Nancy Pelosi visiting Taiwan?

3 Aug 2022

Nancy Pelosi speaking with attendees at the 2019 California Democratic Party State Convention. Image: Gage Skidmore/Flickr (CC BY-SA 2.0)

China has a chip on its shoulder as US lawmaker Nancy Pelosi visits Taiwan and the CHIPS Act gains priority in discussions.

Nancy Pelosi has landed in Taiwan to discuss, among other things, chips – and China is not happy about it.

The self-ruled island is claimed by China, which has not ruled out using force as a means to ‘reclaim’ Taiwanese territory.

The US has followed a policy of deliberate ambiguity in its stance towards Taiwan. But in the highest-profile US visit to Taiwan in 25 years, US House of Representatives speaker Pelosi said the move honours “America’s unwavering commitment to supporting Taiwan’s vibrant democracy”.

“America’s solidarity with the 23m people of Taiwan is more important today than ever, as the world faces a choice between autocracy and democracy,” she tweeted.

“Our discussions with Taiwan leadership reaffirm our support for our partner and promote our shared interests, including advancing a free and open Indo-Pacific region.”

Today (3 August), the US lawmaker is set to meet with the chair of the world’s biggest semiconductor manufacturer, Taiwan Semiconductor Manufacturing Company, or TSMC.

According to the Washington Post, Pelosi and chair Mark Liu will discuss the CHIPS and Science Act passed in the US Congress last week. This act sets aside $52bn in funding and subsidies to boost US semiconductor manufacturing and compete with Asian rivals such as China as a global chip shortage continues.

Last year, TSMC announced plans to pump $100bn into expanding the manufacturing capacity at its factories over three years in response to the chip shortage. This includes a facility it is building in the US state of Arizona.

Semiconductors are used in everything from computer and cars to coffee machines, and a global shortage has meant that many of these products are in short supply. Some US tech executives have argued a steady domestic supply of chips are crucial to advances in technology.

However, the CHIPS and Science Act restricts companies that get US federal funding from increasing advanced chip production in China, a move that impacts big chip players such as Intel and TSMC and further escalates tensions between two of the world’s most powerful countries.

Bloomberg reported that the condition in the act means that TSMC, which provides customers such as Apple with its tech, won’t be able to substantially upgrade or expand its existing operations in China and may lose out on growth opportunities in the world’s biggest chip market.

The move has also prompted leading Korean chipmakers Samsung and SK Hynix to reconsider their investments in China, according to sources who spoke to the Financial Times. “If China is unhappy, they will have to take it up with the US,” a senior Korean official told the outlet.

In 2020, TSMC responded to pressure from US government to cut ties with Chinese company Huawei, which at the time was one of its most important customers after Apple.

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Nancy Pelosi speaking with attendees at the 2019 California Democratic Party State Convention. Image: Gage Skidmore/Flickr (CC BY-SA 2.0)

Vish Gain is a journalist with Silicon Republic