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Comment by Winblows11 | Hacker News Reader

> U.S. government has proposed three potential cooperation options to TSMC

> 2. TSMC joining other firms as investors in Intel Foundry Services (IFS), a division being spun off from Intel, with TSMC transferring its technology as part of its shareholder role.

> On the other hand, if TSMC rejects the proposals, the U.S. government could impose a 100% tariff on chips made in Taiwan

When US can't compete, they have to blackmail/steal/sanction to rescue their failed corporations. The same stealing accusation they level at China.

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> When US can't compete, they have to blackmail/steal/sanction to rescue their failed corporations

Obsolete framing. This would be happening even if Intel were competitive. We’re shifting into a nationalist (possibly kleptocratic) economic footing. Previously, we were friendshoring. This administration doesn’t discriminate between friend and foe.

In fact we seem to be keeping our enemies closer.

I think it's a framing from somebody outside the US. The current US administration didn't just happen. When you could no longer compete under the terms you yourself set. You decided to elect a nationalist leader that would flip the table.

It's a framing that doesn't let the American public distance themselves from their own elected officials. He is your president.

> When you could no longer compete under the terms you yourself set. You decided to elect a nationalist leader that would flip the table

This is the mistake. This isn’t industrial strategy. It’s part messaging tantrum part pursuit of autarky.

America could have been winning, and in some domains it is, but that doesn’t matter because the political question is how those gains are divided inside America.

> a framing that doesn't let the American public distance themselves from their own elected officials

Nobody is doing that. The point is America is grabbing irrespective of whether it’s winning, and without any particular coherence.

> He is your president.

I didn't vote for him. With the way our electoral college works I didn't really even have a voice in this election.

He's The President the people of PA, MI, and GA wanted tho.

So no, he's not "my President".

Doesn't matter what you think or didn't do, he is still your President.

The electoral college is your system.

Was here before I was born, I didn't choose this system. I'm stuck with it.

> You decided to elect a nationalist leader that would flip the table.

Most of us really didn't. Some of us, for the first time in our lives, made substantial personal campaign contributions to the other side because the nationalist leader looked really dangerous for US economics and international relations.

> Some of us, for the first time in our lives, made substantial personal campaign contributions to the other side because the nationalist leader looked really dangerous for US economics and international relations.

It's too bad for those people that the other side they supported was so stupid they lost anyway.

I wrote that side some angry letters over the years. For a long time, there were strong signals they arrogantly thought that "nationalist leader [who] looked really dangerous" was actually an opportunity for them to win on an unpopular platform that appealed to their elites. They did some really stupid shit that undermined their credibility.

It was never about "the democrats aren't perfect", I think we gave up a long time ago on politicians that would actually push things forward. Nope, it was more like here is the "status quo" (things don't get better but they don't get worse either) and here is "batsh*t crazy" (99% chance things get really bad). And I guess that's what many Trump supporters are going for: they know Trump is nuts, but they don't want to see the status quo stand. They want destruction while hoping that they will come out better for it.

I think this is the natural outcome mode of Anarcho-liberalism on the left versus populism on the right, as demonstrated in many countries around the world.

Turns out leftist anarcho-liberal movements mean they simultaneously fuel the right, but ultimately fail due to lack of organization and platform coherence.

It’s weird because Trump emboldens the far left locally. Here in Seattle, we have some crazy city council members that can only get elected when Trump is President (it’s been drifting right since the end of Trump’s last term). Turns out leftist anarchy-liberal movements are fueled by rightist authoritarian-conservative movements as well. And some of us really want moderates running things, not extremists on either side.

Extremist partisans fuelling each other is a sign of too much democracy. We’ve known this since the Athenians. The solution may be in slowing down the signal transmission between base population, elites and policy.

I tend to agree that speed is a key issue, but so is bandwidth.

Democracy by itself is meaningless and valueless. It becomes useful or not based on the systems, institutions, expectations it mediates.

I think that with the advent of digital media, many parts of the system have (specifically parts of the electorate) been rendered non-functional by overload. With a firehose of issues, there is insufficient time for organization, solution seeking, and consensus building.

So yes, slow down the signal, but also prioritize to prevent political and cultural DDOS.

> We’re shifting into a nationalist (possibly kleptocratic) economic footing.

From that point of view, it is probably in TSMC's best interest to not hand over their IP..

> it is probably in TSMC's best interest to not hand over their IP

Absolutely not. TSMC, ironically, can outlast Trump. Unfortunately, Taipei may not be able to.

Robert Wright has been making the related observation that chip export controls to China are making the invasion of Taiwan much more likely.

In a world where TSMC supplied China, at least the PRC would suffer economically from the US/ROC bombing the fabs. With the PRC forced to mainland its own fabs, that leverage goes away.

Except that the Taiwan machines can be turned off remotely by the manufacturer.

I don't see how that matters. Bomb them or turn them off, it is only acts as a disincentive for China if they are reliant on Taiwanese chips.

Forcing China to develop domestic production makes invasion more likely.

China gets around the sanctions by having non sanctioned Chinese companies buy the machines, setup across the street from the sanctioned company and the send wafers back and forth using a conveyor belt over the street. The sanctions are more of a bump in the road then a full halt.

> Previously, we were friendshoring.

Of all the places to "friendshore," Taiwan is probably the worst due to its location and vulnerability.

> Of all the places to "friendshore," Taiwan is probably the worst due to its location and vulnerability

Perhaps we need to learn the value of strategic depth the hard way. Rome had to be sacked, in the 5th century BCE, to become strong. And this time, most of us can fly out while the violence settles.

OK if you want to be isolationist and retreat to a haughty vantage point in your ivory tower, but to isolate in ignominy by purposefully pissing off all your friends and acquaintances is so strange to me.

Is it America First or America Alone?

> On the other hand, if TSMC rejects the proposals, the U.S. government could impose a 100% tariff on chips made in Taiwan.

Seems like a bluff... at least taken literally. Is the US really going to put a 100% tax on the core component of the computing industry?

If this actually played out it would be pretty bad for the US economy.

I suppose the unstated implication us that the US could just take the IP by force.

> I supposed the unstated implication is that the US could just take the IP by force

Isn’t that what China’s stated plan is?

They're extremely careful not to state that as their plan.

In general, they make a huge effort not to talk about their plans vis-a-vis Taiwan at all. They just keep repeating that Taiwan is part of China.

The closest they come to stating that they plan to use force is that they'll sometimes say that they won't reject the use of force.

Given that nobody has proposed a scenario where China actually could do something like "take the IP by force" (since the IP would be gone if they ever tried to invade) and we can generally see that the Chinese leaders aren't complete idiots, it seems highly unlikely that they're planning an invasion any time soon.

If all it costs them were never having access to those chips again the chinese would've taken Taiwan already.

The chinese want to invade Taiwan because they think it's a rebel province, their only consideration is whether the US will oppose them militarily if they do.

> The chinese want to invade Taiwan because they think it's a rebel province, their only consideration is whether the US will oppose them militarily if they do.

IIRC, the US's wargaming shows that if it tries to intervene, it will lose. Taiwan is too far from the US and too close to China.

Exactly.

The US has unrivaled force projection capabilities; half the worlds carrier fleets, the largest navy by tonnage, and the technology to execute unprecedented combined arms maneuvers.

China has insane defense-in-depth; more missiles than you can shake a stick at, the largest navy by number of ships, a vast arsenal of countermeasures, and a 4:1 population advantage.

China can't stand toe-to-toe with the US anywhere except the immediate vicinity of China. In that vicinity, nobody can get close if China doesn't want them to.

> China can't stand toe-to-toe with the US anywhere except the immediate vicinity of China. In that vicinity, nobody can get close if China doesn't want them to.

I think you have a typo there.

Personally, I think if the US wants to defend Taiwan from invasion, it needs to stock them up with a massive amounts of missile/artillery/whatever systems and ammunition, and that needs to be distributed all over the island so there's no concentrated stockpile to attack.

But the US cupboard is bare, and Ukraine made it barer. IIRC, in an all-out war the US itself will run out of missiles in a few days or weeks, and lacks the capacity to replenish them at a reasonable rate.

It's clearly not just about the chips. China didn't attack Taiwan before 1987, when TSMC was founded.

There are many disincentives. The biggest one is that China is confident that they'll get full control of Taiwan without violence.

They believe that the US is in a state of terminal decline and Europe will never overcome centuries of infighting. A significant portion of the population of Taiwan wants to reunify. They fully expect that they can just continue to nurture supporters within Taiwan and wait out the West and Taiwan will just fall into their lap.

Why would they go to war when they think they can get everything they want without war?

I mean, we have a total moron as a leader, so I wouldn't rule out totally insane things like a 100% tax.

If the US bluff is give us what we want or we pull our security guarantee and China invades and you are forced to blow the fabs and move your engineers.

That hurts the US access to chips, short term. But then who is going to fill the demand and where will the talent migrate, and who else is going to build the capacity ($$$)?

The US revealing its true face (the fact it was no allies, only vassals) and trying to bully Taiwan into giving up its most precious economic could be something that help China in the long run. I mean, given two bullies, why try to appease the distant and foreign one, instead of the one with cultural and linguistic ties? Seems an incredibly short-sighted move from Taiwan, but it's good that more people see its true colors. Taiwan should try to gain more protection from Japan.

At some point being assimilated by China starts to look like a good option. Why blow up fabs if you join willingly, and then its China who is blocking US from buying chips made on latest nodes.

IDK... if a profitable market is up for grabs, $$$s are not a problem. The financial system is quite comfortable fronting cash for factories making in-demand products.

Have people suddenly forgotten that markets and enterprises exist, and are quite good at making products. Chips are not minerals. The state department isn't a tool for this job.

In any case, TSMC is currently within the US sphere. Nvidia makes most of the capital gains. US government gets to deny China. US companies get good chips. Where's the upside in blowing all this up?

Perhaps pulling the security guarantee and greenlighting reunification under PRC is the destination, and onshoaring Taiwan's critical industries is deemed prudent in advance of this.

Taiwan added similar ToT clauses when they backed TSMC, UMC, PSMC, and others back in the 1980s-2000s.

Intel is absolutely lobbying for this to hamper TSMC, but Taiwan's industrial policy ain't a saint either. At least this spurs some amount of Capex spending in the US.

Agreed. I learned much from Joe Studwell's book "How Asia Works" (2013), where he argues that among countries in the Asian region, those whose economies flourished were those with protectionist trade policies and export discipline, leading to the creation and honing of domestic industry.

It's more prosaic than that. It's just helping local donors and closely aligned businesses.

A lot of the "ministerial advice" story (the uber powerful ITRI, METI, etc) is to a certain extent a rewriting of history. A major reason why these bureaucratic orgs were so successful in Asian countries was explicitly because of the revolving door - after your 20 year stint at ITRI or METI, you'd join as an advisor for one of the affected companies or start your own consultancy.

This isn't to say that they made bad choices (they didn't), but it absolutely was done due to collusion between regulators and businesses.

The Trump-era "politician aligned businessman" model is the norm across Asia - it's a major reason why Morris Chang lobbied against the CHIPS act, Hyundai lobbied against easing automotive tariffs, Tata lobbied for 5% sales tax on EVs but 25% sales tax on Hybrids and 50% on ICE, etc.

The Asian Model of Development is predicated on "Access Money" to use Yuen Yuen Ang's typography of corruption.

> it's a major reason why Morris Chang lobbied against the CHIPS act, Hyundai lobbied against easing automotive tariffs, Tata lobbied for 5% sales tax on EVs but 25% sales tax on Hybrids and 50% on ICE, etc.

Could you provide citations for some of the above? I’m interested in reading more about them.

> Could you provide citations for some of the above? I’m interested in reading more about them

Sure. These are some off the top of my head, but I can get some more substantive stuff later

Morris Chang - https://www.politico.com/news/2023/02/14/taiwan-tech-king-pe...

The development of Korea's Automotive Industry - https://www.washingtonpost.com/archive/business/1984/10/07/s...

Tata's lobbying - https://www.reuters.com/business/autos-transportation/tata-m...

Yeah. TSMC is the best right now. But they achieved that for a variety of reasons, including a very supportive Taiwanese government. The other major reason was Apple really saved their ass when they moved over from Samsung. The third reason is Intel really did fuck up under the Brian years.

> When US can't compete, they have to blackmail/steal/sanction to rescue their failed corporations.

Name a country where this doesn't occur. The US is not the only country in the world by a long shot that doesn't take measures to protect their failing corporations or export products.

> The same stealing accusation they level at China.

Well they've leveled the accusation against China and nothing changed. So what should the United States do? Continue to let it happen or do something about it? Unfortunately global fair/free trade requires all participants to participate in good faith. If the second largest economy is going to actively undermine that system it just won't work.

The US spent a long time arguing for globalization and free trade, proposing all the treaties, etc, but the US isn't a real republic so anything its signature is on is worth dirt.

Hardly any countries do this. It's only really the US which has had the soft power to behave in this way.

Ok go ahead and impose the tariffs. That will be the shortest, sharpest lesson in economics and leverage, transferring tech profits to government and forcing allies to realign. TSMC is not TikTok.

The problem for TSMC is that they're in a weak position. They cut themselves from China, so what other options they have other than do what the US wants? A smart person could see this result from a mile ahead, first with Biden's insistence that it set plants in the US. The whole idea was always the forced IP transfer to US companies.

They’re very exposed and the only way Taiwan independence survives is by keeping IP and skills locked up on the island. What you can bet on is if Intel had the goods, Trump would say “meh, let’s deal” to China. Compared to that, what cost is a tariff or two?

If I were Taiwan, I’d say “give us nukes and a couple subs, then you get our best factories”. The US nuclear umbrella is now less of a guarantee and countries need to own their security.

Taiwan should learn a lesson from Ukraine. It makes no sense to go to war against a neighboring nation trusting on support from people thousands of miles away. Do any deals locally, that's the best way to survive.

Ukraine did not go to war, Russia went to war, and Ukraine had a "local" deal with Russia (in exchange for Ukraine giving up their nukes, Russia promised to honor their territorial integrity), Russia simply refused to honor their half of the deal.

The initial deal as I remember was with Russia, US and UK. And the deal was a memoranda which is not even binding and does not compel any real actions in case of breach. Basically Ukraine had acted as a fool.

Immediately after break up from USSR they had 50+ million population, strong army, industry, tech, great location as a transit hub, agriculture, resources etc. and their fucking corrupt "leaders" pissed it all away an had turned their country into an easy prey and a shadow of its former self.

Fingers crossed they do.

It's going to be a costly, painful lesson for everybody involved, but it could be a salvatory action that helps slow-down the frightening nonsense building up in the US.

It is just a matter of time before Trump punches himself in the face

"Real men have fabs." – Jerry Sanders.

TSMC - "You don't need to manage your own fabs. Let us do it for you and just focus on what you do best."

Intel kept its fabs, which certainly gave it many advantages, until Intel's tick-tock model failed. Now, America is crying about its own failures and wants to punish others for their success.

It makes America look bitter.

Intel cannot afford to create a new fab on the newest technology.

> Intel cannot afford to create a new fab on the newest technology.

Where did the billions they racked-up in the past decades go to..?

They wasted it on stock buybacks and acquiring start ups that they went onto kill.

the cost to build a state of the art fab is on the order of 30 to 50 billion.

Have you looked at their balance sheet?

> When US can't compete, they have to blackmail/steal/sanction to rescue their failed corporations. The same stealing accusation they level at China.

I'm glad the US is learning some positive lessons here. China has shown that joint ventures and forced technology transfers are the way to go, and the US has shown that an uncritical embrace of the free market/free trade sets you up on a glide path to national vulnerability and eventual irrelevance (while a few dudes get very rich in the process).

"Free market" has disappeared from right wing political discourse for decades now. It was used to get both achieve desired deregulation and simultaneously regulatory capture to attain cartel/monopoly status in almost all markets.

The free trade era is definitely ending. I though Zeihan was nuts saying piracy and sea security would degrade back to mercantilist/privateer days, but it does appear that will happen especially with the Ukraine war showing littoral theater dominance of cheap drones.

Also, free trade and free seas was predicated on the US needing oil. With shale oil, alt energy, and the rise of the EV, the strategic significance of oil will plummet over the next decade. Why have a dozen carrier groups? Why have three?

> "Free market" has disappeared from right wing political discourse for decades now.

"Disappeared for decades" is pushing it, but I'd give you "reduced in prominence for a decade" (e.g. since Trump's rise).

That said, "an uncritical embrace of the free market/free trade" is still a pretty common stance on HN.

I don't remember the precise moment.

I think it died in the Bush years when there was oodles of money being spent on two wars and PartD medicare and the new Homeland Defense boondoggle.

There was a lot of money to be made off of the government in those days.

If proposal 2 goes through, it means that Intel will shut down any development activity in Oregon and rely only on TSMC for next generation technology. It might be warranted given Intel abysmal track record for developing nodes but still unfortunate for the thousands of engineers who will get let go.

Is this the same China that requires the government to do source code reviews on technical products being manufactured in China? Or the one that forces you to share the majority of your company with a Chinese partner? I hear you, but both are bad.

> The same stealing accusation they level at China.

If you cant beat 'em join 'em. Makes sense to me.

Something tells me it's not the entire US that's making this decision

This is a republic of sovereign states, not a democracy.

It's actually both. It's a representative democracy whose representatives are drafted from a group of states who give up some of their independence in exchange for a collective military and a central government that regulates trade across borders to the benefit of all of us.

The states still maintain their own military forces in the form of the National Guard, but in times of war these units can be activated by the federal government to support the US military. So they do maintain some sovereignty in the sense that they have their own military forces, but nowhere near to the extent that the federal government asserts sovereignty here.

You can't really call any state in the US "Sovereign" when the federal government has the power that it does. But also it's nice to be able to travel to Arkansas and not have to worry about your actions that are legal in Washington being used to prosecute you in Arkansas.

Those things you describe are norms not law. States are legally sovereign and will be testing the ability of the Federal government to drive their behavior.

The people who will be controlling the direction of the country will be empathizing the states over the people.

Regardless of the state of elections, we’ll have a deeply conservative or reactionary judiciary for a generation to come. Elections have consequences.

States are not "sovereign". We don't have the Articles of Confederation anymore. States do have certain powers, but not as many as even e.g. Canadian provinces have.

It’s worth noting that this is just the current winds of change with the current administration and not how the US has always acted. Every major economy uses tariffs. This particular use of tariffs is the Trump Administration v1 and v2’s preferred magic hammer for whatever nail they want to hit.

The US will justify any means to achieve its goals. If it doesn't work through democracy, human rights, capitalism, it will invent other more sinister methods to attempt to subjugate other nations.

> When US can't compete, they have to blackmail/steal/sanction to rescue their failed corporations. The same stealing accusation they level at China.

That's all of the countries.

EDIT:

Downvote me all you want, I can pull plenty of examples. Nothing pisses off a voting constituency more than a major regional employer shuttering, so governments do something about it. That, or the government wants to build/maintain a hegemony, so they float companies to outlast competition.

"That's all of the countries", for the countries that have enough leverage to do this.

However in none of those countries but USA will you see in almost any published text or discussion thread a lot of people weeping that the competitors from China are too strong only because their government either subsidizes them or forces foreign companies to transfer IP, or they do not enforce the environmental regulations.

The contrast between these continuous complaints of the US citizens and what the US government really does, by subsidizing all significant private investments with tax breaks and by blackmailing foreign companies to give various advantages to US companies is funny.

No, this is straight up how China built what it has. And stealing technology from established players in Europe and the UK was how the US came to ascendancy in the late 1800's. Before that we were just a backwater.

Go back far enough and everyone will have done this with their nascent industries.

> Go back far enough and everyone will have done this with their nascent industries.

And that’s arguably a core job of any elected government. It’s not to promote external commerce or industry. That’s just a positive side effect of equitable bilateral deals. The primary economic and security responsibility is to your own people.

> And that’s arguably a core job of any elected government. It’s not to promote external commerce or industry.

Is the "free trade" mask completely off now? Good.

The US wants to have its cake and eat it too. It wants to be considered a democratic, competition-friendly, rules conforming country but will act as an autocratic anti-competitive bully against other nations when it sees fit. Of course, I never fell for the propaganda, but it is time for people wake up and realize this is a facade.

I'll keep that in mind next time I read about the Chicken Tax that the guide lamp of democratic, free-trade, rules-abiding practices known as Europe put on Americans to protect their own poultry industry.

There are other examples for both Europe and other regions, but that's what instantly pops into my mind.

This is weak sauce. America should limit chips to other countries and then make Taiwan sell them to the US with the 100% tariffs.

Oh wait, that's what the AI diffusion rules do.

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