Given Dire Warnings on Chips, Tech Giants Dragged Their Feet

Silicon Valley has been getting explicit warnings for years about its chip habit, and the bill may finally be coming due, reports the New York Times. US officials from two administrations have privately pressed tech giants including Apple, Nvidia, AMD, and Qualcomm to reduce their reliance on Taiwan, which produces almost all of the world's most advanced semiconductors. Classified briefings laid out the scenario: a Chinese blockade or attack could halt output from Taiwan Semiconductor Manufacturing Co. (TSMC), crippling the global tech sector and triggering what a 2022 industry-commissioned report called the worst economic shock since the Great Depression.

That study, not previously disclosed, projected an 11% collapse in US economic output and an even deeper contraction in China if Taiwan's chip supply were cut off. But despite billions in subsidies under the Biden-backed CHIPS Act and tariff threats from President Trump, big tech largely resisted shifting orders away from cheaper, more advanced chips made in Taiwan. Doubting Beijing would risk its own economy, executives balked at paying more than 25% extra for US-made chips that often lagged TSMC's cutting edge. Even after Russia's invasion of Ukraine and repeated intelligence briefings warning that China wants its military ready for a move on Taiwan by 2027, companies were slow to commit to domestic capacity, undermining planned factories from Intel and Samsung.

Trump's team has leaned on tariffs as both stick and bargaining chip, threatening high duties on foreign semiconductors unless companies buy more from US plants. That pressure helped secure Nvidia's agreement to source chips from TSMC's Arizona facilities and spurred a $100 billion increase in TSMC's US investment, with more Arizona factories now planned. But experts fear the push comes too late, as the rise of artificial intelligence reveals how dependent the US economy is on Taiwan. Taiwan's dominance in high-end chips is "the single biggest threat to the world economy," Treasury Secretary Scott Bessent warned last month. A Taiwan blockade, he said, "would be an economic apocalypse." Read more from the Times here.