Taipei: Instead of imposing tariffs on Taiwan-made semiconductors, the United States should strengthen its cooperation with Taiwan in semiconductor development to counter challenges from China, according to a government-run think tank.

According to Focus Taiwan, the Research Institute for Democracy, Society and Emerging Technology (DSET), operating under Taiwan's National Science and Technology Council, emphasized the importance of U.S. collaboration with Taiwan. The think tank argues that U.S. efforts should focus on curbing China's influence in the semiconductor sector rather than undermining Taiwan's industry. DSET CEO Jeremy Chang highlighted the potential global dependency on Chinese suppliers if measures are not taken to address the rising challenges from China.

Chang referenced the DSET's "Let a Hundred Flowers Blossom report," advocating for enhanced cooperation between Taiwan and the U.S. The report suggests that managed capacity planning and joint R and D among non-Chinese firms, alongside restrictions on Chinese imports and policies promoting specialized processes, are crucial for the U.S. and its allies to withstand China's semiconductor advancements.

Non-resident DSET fellow Ho Ming-yen noted the importance of democracies imposing strategic export controls on raw materials for mature chip production to limit China's expansion. Ho proposed that the U.S., Europe, and East Asian nations like Taiwan and South Korea should negotiate a sectoral agreement to decide on tariffs, outbound investment restrictions, and establish a coordinated free trade mechanism across the supply chain.

The DSET cautioned that China is aggressively increasing its presence in the global semiconductor market through government subsidies, state-directed investments, and strategic planning. The think tank's report, "Great Siege: The PRC's Comprehensive Strategy to Dominate Foundational Chips," projects that Chinese firms could account for nearly half of the world's new mature-node manufacturing capacity within the next decade, posing risks to the supply chains of the U.S., Taiwan, and allied nations.

Chang pointed out that China's growing role in high-end technology allows it to become a significant player in defense industry supply chains. With data from TrendForce, the "Big Siege" report notes that in 2023, China controlled 34 percent of the global mature chip market, compared to Taiwan's 43 percent and the U.S.'s 5 percent. By 2027, China's share is expected to rise to 47 percent, potentially surpassing Taiwan as the largest mature chip producer, with Taiwan's share dropping to 36 percent and the U.S.'s to 4 percent.

Despite the need for closer ties with Taiwan on semiconductor development, the U.S. is considering imposing tariffs on Taiwan-made chips through an investigation under Section 232 of the Trade Expansion Act of 1962. Chang warned that this investigation could worsen the situation, as it is unlikely to hinder China's semiconductor industry expansion.