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TSMC’s Japan project should avoid wrong US direction of ‘decoupling’

Illustration: Chen Xia/Global Times

Taiwan Semiconductor Manufacturing Co (TSMC)’s chip plant in Kumamoto Prefecture in Japan expects to reach 60 percent local procurement by 2030, TSMC Chief Executive Officer C.C. Wei said during a meeting with Japanese Prime Minister Fumio Kishida on Saturday, Bloomberg reported.

TSMC’s ambition of localizing procurement in Japan bears a strong imprint of the geopolitical drive by the US to divide the Asian and global semiconductor industry chains. If TSMC’s Japanese factory keeps moving in this wrong direction of “decoupling,” its sustainability will be in question.

TSMC’s production complex in Kumamoto, which became operational in February, is the first plant in Japan for the world’s top contract chip manufacturer. According to Japanese media outlet Nikkei, Japan plans to provide subsidies of more than 1.2 trillion yen ($7.9 billion) for this project. Additionally, TSMC is planning to launch a second plant in Japan that will produce advanced 6-nanometer chips by the end of 2027.

TSMC’s plan to build plants in Japan is only part of a broader global strategy. The company has been building a plant in the US state of Arizona, and it is also reportedly planning to build its first European plant in Germany. Compared with its plans in the US and Europe, its progress in Japan has been relatively smooth due to fewer problems such as a lack of specialized labor.

TSMC’s production layout in Japan, Europe and other places is actually very costly. Although the US, Europe and Japan all seem willing to subsidize and attract TSMC to build chip factories in order to revitalize their domestic chip manufacturing industries, considering the current lag in chip manufacturing in these economies, it will be difficult to boost chip manufacturing by solely depending on a single company like TSMC.

Moreover, there is an even bigger problem in all the chip manufacturing ambitions of the US, Europe and Japan – political interference by the US to divide the global and Asian semiconductor industrial chains.

For example, TSMC’s ambition for localization in Japan seems to be seriously affected by the political interference of the US in the global semiconductor supply chain, and is sliding toward “decoupling.” This is an extremely dangerous trend.

From coercing other countries to impose restrictions on the export of high-end chips and production equipment to China to pressuring other countries to cut off their semiconductor supply chain cooperation with China, the blatant US chip war against China has already caused too much damage to cooperation and development in the global chip industry.

If TSMC’s and Japan’s cooperation continues to succumb to US political pressure, blindly emphasizing the “geopolitical” and “economic security” factors of the projects, and further cooperating with the US semiconductor “decoupling” plan against China, then the sustainability of the projects will face great uncertainty.

If TSMC’s Japanese factory achieves 60 percent local procurement, coupled with the use of US machinery and equipment, it will significantly deviate from the efficient and cost-effective supply chains of the Taiwan island and the Chinese mainland, which will greatly increase TSMC’s Japanese production costs and reduce its competitiveness.

Even if TSMC’s Japanese factories can significantly increase output, they will still face challenges in finding markets under the pressure of the US chip war against China.

It is a reasonable concern that when the originally mutually beneficial semiconductor supply chain in Asia is artificially divided into two by the US – that is, separated from the industrial chain and market in the Chinese mainland – even if TSMC’s performance improves in the short term, this growth is bound to be unsustainable, because the share of the mainland chip market in the global semiconductor sector can’t be – and shouldn’t be – ignored.

Due to China’s strong advantages in emerging industries – artificial intelligence, autonomous driving, and electric vehicles, among others – and innovative technology applications, the demand for chips in the vast Chinese mainland market will continue to grow. If TSMC and Japan’s chip-related industries are swayed by the misguided US “decoupling” push, they will definitely miss out on the opportunities in the Chinese mainland market.

Can TSMC’s projects in Japan eliminate the pressure of “decoupling” from the US, achieve a win-win and multi-win situation, and deepen semiconductor industry chain cooperation in Asia? If so, both the Japanese chip industry and TSMC will face bright prospects. It is hoped that Japan’s chip ambitions and the establishment of TSMC’s factory in Japan will not go in the wrong direction of “decoupling.” For the chip sectors in Japan and China’s Taiwan region, depoliticization is the only correct strategy.

The author is a reporter with the Global Times. [email protected]

China’s tourism booms during Qingming Festival holidays, reflecting nation’s strong vitality and potential

Passengers line up to board a high-speed bullet train at a railway station in Nanjing, East China’s Jiangsu Province, on April 6, 2024, the last day of the Qingming Festival holidays. About 119 million domestic tourist trips were made during the holidays. Photo: VCG

China’s consumption market during the just-ended Qingming Festival holidays showed better-than-expected performance, underscoring the strong vitality and potential of the economy while injecting new momentum in driving stable economic recovery.

During the Qingming Festival holidays, lasting from Thursday to Saturday, ticket bookings for popular domestic scenic spots surged by 5-fold compared with the same period last year, noted a report from a Chinese online travel agency Qunar sent to the Global Times on Saturday.

About 119 million domestic tourist trips were made during the holidays, up 11.5 percent from the same period in 2019, according to the Ministry of Culture and Tourism. The trips were estimated to bring in 54 billion yuan ($7.56 billion) in tourist revenue, an increase of 12.7 percent from 2019.

Many tourists kicked off the holidays with short-distance journeys. Notably, Tianshui in Northwest China’s Gansu Province and Kaifeng in Central China’s Henan Province – which have become internet sensations lately – saw the amount of hotel bookings jump by 12-fold and 4.5-fold respectively, according to Qunar.

Crowds appeared across tourist spots in China as many struggled to reach their destinations. A Beijing resident surnamed Li told the Global Times that his family has to wait for about two hours to park the car at the Juyongguan section of the Great Wall in Beijing on Thursday because there are so many tourists.

According to film ticketing platform Maoyan, the box-office revenue has reached 823 million yuan for the holidays, surpassing last year.

The service sector now contributes to around 60 percent of China’s economic growth. The robust recovery of tourism, hospitality and transport sectors will boost the overall recovery of domestic consumption and contribute to stable economic recovery, Xu Xiaolei, a marketing manager at China’s CYTS Tours Holding Co, told the Global Times on Saturday.

The potential of the consumption market is set to be further unleashed during the upcoming May Day holidays, Xu said, noting the surge of China’s consumption market reflects the strong vitality and potential of the economy.

Stable recovery

In addition to the robust recovery in the cultural and tourism sectors, the country’s manufacturing purchasing managers’ index (PMI) posted better-than-expected result in March, indicating notable increase in internal demand.

Analysts said that the world’s second-largest economy got off to a good start in the first quarter of 2024, laying a solid foundation for achieving the pre-set annual GDP growth target of around 5 percent.

“Between January and March, China’s economic growth rate is expected to reach around 5 percent on a yearly basis, supported by a couple of factors including consumers’ increased willingness to spend, stable infrastructure and manufacturing investment as well as improved external environment,” Wen Bin, chief economist from China Minsheng Bank, told the Global Times on Saturday.

There are multiple aspects where Chinese authorities can step up efforts in the second quarter to bolster the upswing recovery of the economy, according to Wen.

This year’s Government Work Report outlined an array of measures to boost growth this year. According to the report, a proactive fiscal policy and a prudent monetary policy will be continued in 2024, and a series of tasks will be taken to modernize the industrial system and develop new quality productive forces at a faster pace.

Wen said the central bank is expected to strengthen efforts to enhance “precision and effectiveness” of monetary policies so as to inject new momentum to the high-quality development of the economy. On the one hand, efforts should be made to boost economic structure adjustment, economic transformation and upgrade and the transition of old and new momentums, while on the other hand, the authorities should better meet reasonable consumption and fund-raising needs with targeted measures, he said.

Cao Heping, an economist at Peking University, said he is optimistic about the country’s GDP growth rate in the first quarter. “The development of new quality productive forces has triggered the new driver of China’s development,” Cao told the Global Times, noting the country will remain the main driver of world economic growth in 2024.

Positive prospect

Driven by China’s stable economic recovery so far this year, foreign-funded companies have voted with their feet to briskly expand investment in China for unprecedented opportunities amid the country’s high-level opening up.

In January, US retail giant Costco Wholesale opened a new store in Shenzhen, Guangdong Province, which is the sixth Costco store on the Chinese mainland. The number of registered members surpassed 140,000 on the first day alone, setting a record globally, according to local media outlet Shenzhen Daily.

On March 21, US smartphone maker Apple inaugurated its largest retail store on the Chinese mainland in Shanghai, with Apple CEO Tim Cook opening the doors of the new store and welcoming Chinese consumers.

During a meeting with Chinese Commerce Minister Wang Wentao on March 22, Cook said China is an important market with a rich talent pool and innovation vitality, and a crucial supply chain partner for Apple. He reaffirmed that Apple is committed to a long-term development in China and plans to increase investment in China’s supply chain, research and development, and marketing.

In order to steadily promote high-level opening-up and make greater efforts to attract and utilize foreign investment, the General Office of the State Council issued an action plan on March 19. The action plan proposes 24 measures across five aspects, including expanding market access, enhancing appeal to foreign investment and fostering a level playing field.

The Chinese government is cultivating new quality productive forces, signifying the country is on the correct development trajectory, John Ross, a senior fellow at the Chongyang Institute for Financial Studies, told the Global Times in a recent interview in Beijing.

Based on observations and research over the past 30 years related to China’s economy, there is no reason why China cannot meet its 2024 GDP growth target, and undoubtedly, the country will remain the main driver of world economic growth as it has for the past 40 years, he said.

Trade with China mainly settled in yuan, rubles: Russian deputy PM

Aerial photo taken on February 21, 2021 shows the first China-Europe freight train linking St. Petersburg of Russia with Chengdu departing the Chengdu International Railway Port in Chengdu, Southwest China’s Sichuan Province. Photo: Xinhua

About 92 percent of trade settlement between Russia and China is now conducted in Russian rubles and Chinese yuan, Russian Deputy Prime Minister Alexei Overchuk said on Wednesday at the ongoing Boao Forum for Asia in South China’s Hainan Province.

He also said that Russia hopes to strengthen financial ties with other countries to replace the US dollar in the international arena in the future, in a bid to ensure the stability and security of local currencies.

Overchuk’s remarks came amid growing emphasis by both sides on trade in local currency and de-dollarization efforts in a bid to reduce risks and costs. In July 2023, Russian President Vladimir Putin announced at the 23rd Meeting of the Council of Heads of State of the Shanghai Cooperation Organization that over 80 percent of trade settlement between Russia and China was conducted in Russian rubles and Chinese yuan, according to media reports.

Bilateral trade between China and Russia continues to show upward momentum, reaching $240.1 billion in 2023, up 26.3 percent from a year earlier. The figure was over $190 billion in 2022, with energy taking the key share.

China-Russia relations are a model of relations between major powers. When talking about the relationship between Russia and China, Overchuk emphasized that the dynamic and stable relationship between the two countries is based on mutual respect, equality, and years of profound historical exchanges between the two governments. Russia will continue to promote the growth of trade between the two countries and advance new interconnection projects, he said.

One of the prominent changes over the past 50 years has been the rise of the Global South, Overchuk said while addressing a sub-forum titled “The Rise of the Global South.” Faced with increasing global uncertainty, countries from the Global South should strengthen cooperation and unite to meet challenges, he said.

Overchuk also pointed out Russia’s willingness to strengthen cooperation with countries in the Global South in the field of cross-border trade and transportation infrastructure construction, saying that Russia hopes to expand market access and push for the building of international transportation corridors.

“We are currently seeing signs of anti-globalization and rising trade fragmentation in global markets, which requires us to strengthen cooperation and connections with our neighboring countries,” said Overchuk.

2024 marks the 75th anniversary of the establishment of diplomatic relations between China and Russia. The determination of China and Russia to work together hand in hand is even stronger, the foundation of generational friendship is more solid, and the prospects for comprehensive cooperation are even broader, Zhang Hanhui, the Chinese Ambassador to Russia, said in an interview with Tass on March 21.

US should play a responsible role in ensuring stable, smooth new-energy supply chain: FM spokesperson

The manufacturing line of a NEV factory in Southwest China’s Chongqing Municipality Photo: VCG

Ensuring a stable and smooth global supply chain serves the interests of all, and is a responsibility that should be shared by all parties, including the US, a Chinese Foreign Ministry spokesperson said on Thursday, in response to comments made by US Treasury Secretary Janet Yellen on Chinese new-energy products.

A Chinese expert in China-US trade said that China’s edge in new-energy industries are the result of Chinese entrepreneurship, massive investment in tech innovation and the country’s comprehensive manufacturing strength, as well as the choice of the market, which US officials should respect.

On Wednesday, Yellen said she intended to warn Chinese officials in “a constructive talk” about the negative effects of subsidies for China’s clean energy products, including solar panels and electric vehicles (EVs), during a planned visit to China, according to a report by Reuters.

Yellen reportedly said China’s “overproduction” of solar panels, EVs and lithium-ion batteries have “distorted” global markets and hurt jobs in other industrial and developing economies.

In response, Foreign Ministry spokesperson Lin Jian said at a routine press conference on Thursday that China firmly opposes trade protectionism and unilateral bullying.

The global industrial and supply chains are shaped and developed by the laws of market and business choices combined, Lin pointed out, noting that the vigorous development of China’s new-energy sector relies on technological innovation and excellent quality formed amid global market competition, rather than relying on so-called subsidies for support and protection.

“Speaking of subsidies, I would like to point out the US is leveraging the US Inflation Reduction Act (IRA)’s tax credit policies to distort fair market competition and disrupt the global industrial chain, violating relevant rules of the WTO and the principle of market economy,” Lin said.

“China firmly opposes such acts by the US and urges the US to correct its discriminatory industrial policies,” said Lin.

Zhou Mi, a senior research fellow at the Chinese Academy of International Trade and Economic Cooperation, told the Global Times on Thursday that any mismatch in supply and demand can only be addressed through global industry dialogue and cooperation.

Zhou urged the US side to observe the laws of market, refrain from unilateral control measures under the pretext of protecting national security, and lower tariffs on Chinese goods.

In mid-March, Donald Trump, now presumably the Republican Party US presidential candidate, threatened that he would hit cars made in Mexico by Chinese companies with a 100-percent tariff, according to Bloomberg.

In what analysts say is a “reasonable, legitimate and well-founded” move, China lodged a dispute complaint at the WTO against the US over discriminatory subsidies on new-energy vehicles (NEVs) under the US IRA on Tuesday.

The move not only aims to safeguard the interests of Chinese new-energy vehicle companies and a fair competitive environment for the global NEV industry, but also to firmly defend the rules-based multilateral trading system and resolutely maintain the stability of the global NEV industrial chain and supply chain, a spokesperson of the Ministry of Commerce said on Thursday.

In 2023, China accounted for around 60 percent of global electric car sales, according to the International Energy Agency (IEA). China doubled solar panel capacity in 2023, and wind power capacity rose by 66 per cent from a year earlier, the IEA estimated.

China is a current leader in new-energy industry. In 2023, its export value of solar panels, electric vehicles and lithium-ion batteries totaled 1.06 trillion yuan, increasing 29.9 percent from 2022, customs data showed.

China’s new-energy industry deserves to be rewarded as their successes stem from risky endeavors that aim to transform the world into a green, better living place, Zhou said.

Chinese Commerce Minister calls for Netherlands to maintain regular lithography machine trade for healthy development of bilateral trade ties

A chip manufacture machine Photo: VCG

The Chinese side considers the Netherlands a reliable trade partner and hopes the Netherlands can uphold the spirit of contract to support companies fulfill contract obligations to ensure the regular trade of lithography machines, Chinese Commerce Minister Wang Wentao said while meeting visiting Dutch Trade Minister Geoffrey van Leeuwen in Beijing on Wednesday.

The Chinese side commends the Netherlands for being committed to free trade, Wang said, calling for the two sides to jointly safeguard stability of global semiconductor industrial and supply chains to prevent the abuse of security concept and boost the healthy development of bilateral economic and trade ties, according to a press statement on the website of the Ministry of Commerce.

Van Leeuwen said trade is a major contributor to the economy of the Netherlands, and the country is committed to free trade and attaches great importance to China-Dutch economic and trade cooperation.

China is one of the most important trade partners of the Netherlands and the country is willing to continue to be a reliable partner for China, van Leeuwen said.

The Dutch official said that its export control measures do not target any country. The Dutch government made the decision on the basis of independent evaluations and seeks to reduce impact on the global semiconductor industrial and supply chains at its most, with the prerequisite of safety.

Van Leeuwen said he expects that the two countries will further cooperate in fields including green transition and care services.

The Dutch government in 2023 introduced a licensing requirement for ASML’s shipments of its most advanced deep ultraviolet lithography machines.

On January 2, ASML said that the Dutch government had partially revoked an export license for the shipment of some chipmaking equipment to China, according to a press release sent to the Global Times.

Exports of NXT:2050i and NXT:2100i lithography systems in 2023 were affected, the company said.

Global Times