US official says Chinese seizure of TSMC in Taiwan would be 'absolutely devastating'

FILE PHOTO: "Senior Chinese Leader Event" on the sidelines of the APEC summit, in San Francisco

By David Shepardson

WASHINGTON (Reuters) -U.S. Commerce Secretary Gina Raimondo said Wednesday a Chinese invasion of Taiwan and seizure of chips producer TSMC would be "absolutely devastating" to the American economy.

Asked at a U.S. House hearing about the impact, Raimondo said "it would be absolutely devastating," declining to comment on how or if it will happen, adding: "Right now, the United States buys 92% of its leading edge chips from TSMC in Taiwan."

TSMC declined to comment.

Last month, Raimondo announced the Commerce Department would award TSMC's U.S. unit a $6.6 billion subsidy for its most advanced semiconductor production in Phoenix, Arizona and up to $5 billion in low-cost government loans.

TSMC agreed to expand its planned investment by $25 billion to $65 billion and to add a third Arizona fab by 2030, Commerce said in announcing the preliminary award.

The Taiwanese company will produce the world's most advanced 2 nanometer technology at its second Arizona fab expected to begin production in 2028, the department said.

TSMC, the world's largest contract chipmaker and a major supplier to Apple and Nvidia had previously announced plans to invest $40 billion in Arizona. TSMC expects to begin high-volume production in its first U.S. fab there by the first half of 2025, Commerce said.

Congress in 2022 approved the Chips and Science Act to boost domestic semiconductor output with $52.7 billion in research and manufacturing subsidies to wean the United States from reliance on Asia for chips. Lawmakers also approved $75 billion in government loan authority.

A 2023 U.S. government paper estimated a major manufacturing disruption in Taiwan could lead to as high as a 59% increase in the U.S. price of logic chips that domestic downstream producers would have to pay.

(Reporting by David Shepardson; Additional reporting by Ben Blanchard in Taipei; Editing by Alexandra Hudson)