The US would face a 'deep and immediate recession' if made-in-Taiwan chips were cut off, US commerce secretary says

The Taiwan Semiconductor Manufacturing Company, or TSMC, accounts for about 90% of the world's chip output,

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• The US faces a "deep and immediate recession" if its access to Taiwan chips are cut, said Commerce Secretary Gina Raimondo.
• The US buys 90% of the leading-edge chips it uses from Taiwan.
• The Senate voted on Tuesday to advance a $50 billion bill aimed at boosting US chip production.

The US would face a "deep and immediate recession" if the country's access to made-in-Taiwan chips were cut off, Commerce Secretary Gina Raimondo said on Wednesday.

"If you allow yourself to think about a scenario where the United States no longer had access to the chips currently being made in Taiwan, it's a scary scenario," Raimondo told CNBC's Sara Eisen on Wednesday. "It's a deep and immediate recession. It's an inability to protect ourselves by making military equipment. We need to make this in America."

Raimondo's comments came after the Senate on Tuesday voted 64-34 to advance a $50 billion bill aimed at boosting semiconductor manufacturing in the US.

"We need a manufacturing base that produces these chips, at least enough of these chips, here on our shores because otherwise we'll just be too dependent on other countries," Raimondo told CNBC.

Although many of the chips the US uses are designed at home, the country purchases 90% of leading-edge chips from Taiwan, where they are made. This poses a national security risk as such chips are used in a wide range of applications, including military, Raimondo added.

"You can't have biotech industry, or artificial intelligence, or quantum computing, or really any innovation without semiconductors," said Raimondo. "Semiconductors are a cornerstone technology necessary to underpin every other innovation-based industry."

The Taiwan Semiconductor Manufacturing Company accounts for about 90% of the world's chip output, according to Reuters, citing industry estimates.

This poses a risk to US national security as China claims self-governing Taiwan as its territory and Beijing has not ruled out using military force to "reunify" with the island.

Tensions between the US and China ratcheted up after President Joe Biden said in May that the US would defend Taiwan militarily if China attacked the island. An unnamed White House official later said Biden's comments were not out of line with the existing US policy on China that "has not changed."

The US is already facing recession risks due to decades-high inflation rates and the Federal Reserve's interest rate hikes, which make it more expensive to buy big-ticket items like property and cars.

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