Taiwan, Japan Agree to Boost Cooperation on Economic Security

A logo of TSMC at its headquarters in Hsinchu city, Taiwan, on Aug. 31, 2018. Tyrone Siu/Reuters

The ruling parties of Taiwan and Japan agreed to boost economic security cooperation, with a focus on supply chain resilience for semiconductors and other crucial items.

Although self-ruled Taiwan and Japan do not have formal diplomatic connections, they maintain close unofficial ties and share concerns about China, particularly its increased military activities near the two.

During the online meeting of Dec. 24, Japanese officials stated that the two countries, as well as the United States, needed to work together to build resilient supply chains such as semiconductors in response to China’s high-tech investments.

“At the moment, we must exert maximum effort to address the semiconductor shortage, but areas of collaboration should be expanded as we move forward,” said Akimasa Ishikawa, head of the Economy, Trade, and Industry Division of Japan’s Liberal Democratic Party (LDP) who participated in the meeting.

The meeting, following initial discussions in late August, was attended by two senior lawmakers each from the LDP and Taiwan’s Democratic Progressive Party (DPP).

Lo Chih-cheng, head of the DPP’s international department, joined the talk and told reporters that the two parties agreed to have more regular dialogues in the future.

The Japanese side also reaffirmed its support for Taiwan to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a free-trade pact between 11 countries around the Pacific Rim, Lo said, which China is also seeking to join.

DPP’s lawmaker Chiu Chih-wei told reporters that chips were not merely an issue for Japanese industry,  it was also a matter of national security when confronted by China.

“Both parties agreed to have in the future more collaboration in the chip supply chain, and a more comprehensive framework of cooperation on semiconductors and other industries,” Chiu said.

The Japanese government has expressed a desire for more such initiatives to grow local semiconductor companies’ annual revenue to more than $114 billion by 2030, approximately three times that of 2020.

Taiwan Semiconductor Manufacturing Co., the world’s largest contract chipmaker, received official approval from Taiwan on Dec. 20 to build a chip plant in Japan. With the support of the Japanese government, TSMC’s planned $7 billion plant with Sony Group is critical to Japan’s two key industries: autos and semiconductors.

On the other side, Taiwan’s government welcomed Japanese investment on the island. Japan supplies the majority of the chipmaking equipment and materials used in Taiwan.

“We place a premium on our connection with Japan,” said Taiwan’s Deputy Economic Minister Chen Chern-chyi on Nov. 25 during a seminar in Taipei with Japan’s Mizuho Bank.

Taiwan’s semiconductor production is expected to jump by more than 25 percent in 2021 to $147 billion, and will continue to expand next year to $168 billion, according to Nikkei, citing a report of the Industry, Science and Technology International Strategy Center (ISTI).

IC Insights reported on Oct. 13 that Taiwan accounted for approximately 21.4 percent of worldwide chip capacity as of December 2020. Meanwhile, led by TSMC, Taiwan controls 63 percent of the world’s most advanced chips—those smaller than 10 nanometers.

TSMC, whose clients include Apple, Qualcomm, and Nvidia, also announced last month that it would establish a new chip facility in Taiwan’s southern city of Kaohsiung. The company declined to disclose the cost of the new factory building.

Both TSMC’s new plants located in Taiwan and Japan will begin construction in 2022 with production scheduled to begin in 2024.

TSMC has committed to investing $100 billion in semiconductor capacity expansion over the next three years. It is constructing a $12 billion chip fabrication plant in Arizona.

Reuters contributed to this report.