In this week’s episode of China Insider, Miles Yu discusses the $100 billion investment Taiwan Semiconductor Manufacturing Company (TSMC) made in its United States facilities and how this investment reaffirms the company’s commitment to US-based semiconductor production. Then he explores the House of Representatives’ new legislation on Chinese student visas and the imbalance in US-China education exchange. Last, Yu examines the latest rhetorical exchange between Taipei and Beijing and the significance of Taiwan’s resilience against the Chinese Communist Party’s United Front.
China Insider is a weekly podcast project from Hudson Institute’s China Center, hosted by China Center Director and Senior Fellow Dr. Miles Yu, who provides weekly news that mainstream American outlets often miss, as well as in-depth commentary and analysis on the China challenge and the free world’s future.
Episode Transcript
This transcription is automatically generated and edited lightly for accuracy. Please excuse any errors.
Miles Yu:
Welcome to China Insider, a podcast from the Hudson Institute's China Center. I am Miles Yu, senior fellow and director of the China Center. Join me each week for our analysis of the major events concerning China, China threat and their implications to the US and beyond.
Colin Tessier-Kay:
It is Tuesday, March 18th and we have three topics this week. First, we take a look at TSMC'S plans to invest a hundred billion dollars in the United States, the motivations behind the move and geopolitical implications for Taiwan. Second, we discussed Taiwan President Lai Ching-te latest remarks as Taiwan toughens up against the ongoing coercion campaign from the CCPs United front, the importance of these statements and what the potential consequences might be for the cross-strait status quo. Lastly, Miles unpacks the emerging legislation from Congress seeking to limit and remove all PRC student visas to the US and whether this move will enhance US national security. Miles, how are we doing today?
Miles Yu:
Very good, Colin. Nice to be with you again.
Colin Tessier-Kay:
Likewise. So, we start things off this week with semiconductors. Taiwan Semiconductor manufacturing company or TSMC recently announced plans to invest a hundred billion dollars in the United States, taking the total committed amount now to 165 billion if you include the existing investments in building factories in Arizona and in what the company says is now the largest single foreign direct investment in US history. The reactions to the announcement have been more divided than not with some saying this move would harm Taiwan Silicon Shield and current economic deterrence capabilities. While others are more optimistic saying this move builds trust between Washington and Taipei and certainly benefits ongoing security efforts. Miles, maybe you can tell us a bit about why TSMC decided to make this investment and a bit about the motivation behind it.
Miles Yu:
Well, I think the high-end chips are today to global commerce is like oxygen to a human body. You must constantly have it and the TSMC has a dominant share of high-end chip making pretty much like in a monopoly in most cases. TSMC is the largest Taiwan based company chip making, but it's not entirely a Taiwanese company. It's really a marvel of international cooperation because modern technology cannot be done by one single country. You have to really, really draw international resources and talents. And TSMC is heavily dependent upon American market. It's the largest customers are in the us, apple, Intel, Qualcomm, you name it. So that's why US market is very important for TSMC. Now, TSMC also is not a hundred percent, it's a public company, it's trading. Americans have a really huge share in TSMC stock. For example, the board of TSMC, TSMC has four board members, but there are five Americans on the board, one British.
So, you can see TSMC is as much Taiwanese company as American company. So, this is a very important point. We have to really realize that of course the largest plant and the headquarters of TMC is in Taiwan and that's no question about leadership is all Taiwanese. So, this is a very important investment. You mentioned about 165 billion investment. This is basically in two phases. One, during Trump first administration, TSMC put into this huge investment in Phoenix, Arizona building some of the what called the fabs, basically factory plants there. Now the second term, President Trump is in the White House.
This is hundreds of billions of dollars of additional investment really fits into what I call Trump doctrine for global strategy. Now if you look at this, President Trump is different from President Biden. His predominant approach to global security is something called the peace through strength that is put premium on deterrence. The other side of that is that to enhance global security through economic integration, and this is really important part of the Trump geopolitical strategy that is, let me repeat, to obtain global security through economic integration. This is, you can see that in Ukraine for example, when President Trump proposed to Zelenskyy, you got to really do some kind of economic deal, rare earth special minerals. Those kinds of economic integrations are also part of security agenda. TSMC is the same thing. The TSMC’s large amount of investment in the United States serves to tie US Taiwan together. Furthermore, making China's threat to Taiwan also a threat to the US interest. And this is very important and I think to protect TSMC is more and more about to protect American technology as well. And this American angle is also very important as President Trump has said. And the president CEO of TSMC C.C. Wei when he showed up in the White House make an announcement also made it abundantly clear. And Taiwanese government love this approach obviously.
Colin Tessier-Kay:
Yeah. And there seems to be at least within the divided response, I'll highlight two primary concerns with this move to frame the context. The first is that a few folks here, both in DC and in Taipei, claim that this might long-term weaken Taiwan Silicon Shield and the impact this might have on Taiwan's economic deterrent strategies. But the other one here, and you kind of mentioned a bit about this, were concerns about the security of advanced chip making processes being compromised in such a transnational agreement. And while the specific terms of the agreement have yet to be confirmed, this move carries substantial implications for the cross-strait status quo. And you talked a little bit about what those geopolitical impacts might be, but what are the larger geopolitical considerations in the cross street dynamic right now that we should really be aware of with this move gaining traction?
Miles Yu:
Well, the critics, as you cited, they're totally wrong. I mean it is very shortsighted, number one. Number two, they are just not correct. I mean, for example, you cannot say TSMC is a crown jewel, very dominant over there. TSMC alone will create deterrence against China. No, it's invitation for invasion because TSMC without a security package provided by the American and Taiwanese government together is not safe. So, as I said earlier moments ago, TSMC is a part of the global security strategy as well from the US point of view. On the other hand, the investment in the United States not only will not diminish the value and security of TSMC and Taiwan, what also it will enhance that and will really make American great again in a very sort of strategic sense because chip manufacturing inside the United States, they will increase American share in global chip making. And I think secondly for TSMC itself, you have enormous benefits as well.
Mostly, you cannot really say that TSMC is not motivated by its self-interest because if you make the chips in the United States, you basically avoid tariffs. The tariffs avoidance is a very major concern. This is not just for TSMC. Apple and many other companies all do the same thing. They move their manufacturing capabilities back to the United States. And this is good for America, it's good for these companies too. And TSMC cannot lose American market as I said earlier. And if you just imagine you have no such a strong tie between US and TSMC, you have a lot of problems with these customers, Intel, Apple, Qualcomm, Microsoft, all those are major, major customer of TSMC. And I think this will to make chips inside the United States will enhance those ties with its customer base. TSMC also is really a genius company in the sense that unlike many companies who profess they're going to invest in the United States like Taiwanese company, Foxconn the largest maker for Apple iPhone, they invested something like 10 billion Wisconsin that went busted, didn't work out because they did not have TSMC’s managerial genius.
TSMC plant in Arizona is very successful in a very short period of time. Arizona plant is now able to make chips very sophisticated, as good as those chips made inside Taiwan. And that's really remarkable because TSMC found one magic, that is the hire, the most disciplined, the most loyal workers and the unit leaders. Those are the US of veterans, the US of veterans, when they get out of the military, they're still in their mid-thirties and early forties. They are disciplined, educated and hardworking, very loyal customers and leaders. So TSMC hire a lot of them in Arizona plants and that's why they don't have a labor problem. They don't have a quality problem. And that's the really is amazing, a very important part of this TSMC deal in the United States. I think most people probably have not pointed out yet. That is TSMC'S investment in the United States will serve as one of the greatest incubators of high- tech talents for the United States because TSMC is a Taiwanese company, they're Taiwanese Americans, they are dominating Silicon Valley, they're dominating in some of the key industries in emerging technologies.
They are replacing the Indian American dominance in high tech leadership right now. You say those guys who are leading Google, Microsoft, all the major companies, IBM, they're all Indian Americans, but no longer the case now because they're being replaced by industry titans of Taiwanese background such as the CEO of Nvidia, Jensen Huang and his cousin Susan Sue of a MD. And you can go on the list of very long. Morris Chang is a founder of TSMC and he's in his nineties and he was a long time executive for Texas Instrument. And Steve Chen, who is the co-founder of YouTube, and Jerry Young of course is legendary. Jerry Young is a former CEO of Yahoo. He also is the co-founder of Yahoo and he's now the chairman of the board of trustees for Stanford University. And you got Tony Hsieh, he's a former CEO of Zappos and of course Kai-Fu Lee who's the former president of Google China. So, this large group of industry leaders are reshaping Americans, industry management. And I think they're going to create a lot of trend, a lot of industry leaders in high technology, particularly in chip making industry in the United States. And that's very important. It's a long-term investment. It's not just for the short-term revenue and bottom line.
Colin Tessier-Kay:
And I think that's important point to keep in mind here too as we now shift into our next topic for today and kind of keep with the focus on Taiwan, especially when it comes to Taiwan, use deterrence and cross trade relations. So, in a recent address, President Lai Chang-te called China a foreign hostile force in that Taiwan had no choice but to take even more proactive measures including but not limited to reinstating the military court system restricting residency criteria for nationals from China, Hong Kong and Macau without seemingly missing a beat. CCP spokespeople with China's Taiwan affairs office responded, labeling President Lai as a destroyer of cross strait peace, a creator of crisis and even borrowed Lai’s phrase saying that China would have no choice but to take decisive measures if Taiwan independent separatist forces dare to cross the red line and those who play with fire will surely be burned. So, President Lai and the DPP are certainly no strangers to Beijing's rhetorical condemnation. But this development very much ties into our discussions last week on China Insider and our ongoing attention to China's united front coercion and gray zone strategies against Taiwan. So, Miles, maybe you can walk us through this latest rhetorical exchange. Why is it so significant and what the potential consequences might be here for the cross-strait status quo?
Miles Yu:
China keeps saying the red line, red line, I mean that's just nonsense because there is no red line, white line, blue line. China has one line that's party line. The party line is Taiwan is part of China. So, if you think about this, if China really means the red line, that means that Taiwan wants to declare independence. But that's a red herring. The Taiwanese government always said across the political party line, keep saying Taiwan is already an independent country. Taiwan wants to maintain status quo. Status quo is virtual independence. So, there is no move away. Closer to what China said line, it just stands there has been there since 1949. So, it's a virtual independence for all practical purposes. Taiwan is a self-governing democratic country that deserve international recognition of sovereignty and independence. So now back to the main topic of today's discussion, which is why President Lai toughens up war against CCPs united front infiltration.
And this is very important because Taiwan has been sort of quiet to avoid major spasm by the Chinese communist government to further its threatening movement toward Taiwan. On March 13th, President Lai just make the stunning statement in which he announced Taiwan is now deeply infiltrated by hostile foreign adversaries that's China and specifically China is a foreign adversary hostile to Taiwan. And he also announced he's going to resume military tribunal to try those traders who selling out their country to the CCP. And that's very, very important. And he vowed to basically to partisan those who are in violation of the Taiwan's national security. This is for very good reason. Taiwan is an open society. Open society is subjected to infiltration by China's united front work, which is basically buying proxies, buying politicians and buying media outlets and buying military officers and retire or active by the way.
So that's is really, really important, particularly alarming to Taiwanese leadership and government is what's going on in the Taiwanese parliament known as the legislative event. In the legislative event, the opposition, which is headed by KMT dominates and they run the legislative. The majority leader in the legislative UN is a gentleman by the name of Fu Kun-chi. This guy at the beginning, an opening session of the current legislative UN where his party is the majority party. He led 16 KMT legislative legislators to travel to Beijing without government approval to meet with Wang Huning is the man in charge of taking over Taiwan for the Chinese Communist Party. And this is absolutely astonishing. So that's why these things and among many of the things have triggered a nationwide cross-country massive recall movement that basically recall all these guys who have shown their disloyalty to the country. So, this is why this situation is very dire. That's why President Lai made those very tough remarks on March 13th to make it clear his resolve to solve this problem of CCP infiltration in Taiwan.
Colin Tessier-Kay
Yeah, and I kind of want to follow up on that with a thought too then within the domestic context to Taiwan, obviously the announcement that they're going to be returning to military tribunals in the court system has raised a lot of concerns amongst the domestic Taiwanese population as far as where the society might be moving in the near term to respond to these threats from the mainland. Do you think that there are any other potential areas that the DPP or the Taiwanese government might seek to reform or reinstate to kind of meet these emerging challenges from the united front? And do you see any areas currently where Taiwan is perhaps more vulnerable than in other areas to the infiltration of CCP coercion in Taiwan proper?
Miles Yu:
Yeah, I mean obviously the Taiwanese government is facing this problem of dual citizenship. There are a lot of people who are holding Taiwanese passport, but in the meantime, they also have secretly obtained the Chinese passport. Taiwan's government has vow to eliminate that. Chinese government doesn't even recognize the dual citizenship. Of course, it doesn't recognize Taiwan as an independent country. So, this is the problem. Another problem really has something to do with cross trade marriage. I mean you have a massive number of PRC nationalism, women mostly marrying Taiwanese men. Now the number is really alarming. The divorce rate among those people who marry Taiwanese men is close to like 50%. Now Taiwanese society is a traditional one 50% divorce rate may sound very normal in Western societies, but it's really high for Taiwanese society that's more than four or five times larger than the Taiwanese average divorce rate.
So many of those Chinese mainland ladies, they turn openly hostile to Taiwan. I mean recently there is such a prison from mainland China and she has turned himself into a huge internet celebrity. He has been championing military takeover of Taiwan in open air for a long, long time with a big following. And then finally government said no more, and then she got deported. So, you have issues like that and also you have cross strait exchanges in the name of education, in the name of science. But then they all have a very big problem because many of them definitely carry some special missions on behalf of the Chinese government. All in all, I will say the democratic processes have been abused, but people of the ill intent and what's really alarming to the Taiwanese government, to a society as a whole is what happened recently in South Korea.
Literally there is a parliament engineered coup to arrest its president. And this was a big deal because it is a very similar situation in Taiwan that is the opposition control the parliament and the Parliament tries very hard to delegitimize the Democratic elected the chief executive of the government. And in this particular case has not been as bad as a coup, but the legislative events controlled by the KMT and TPP by the way, altogether, they're trying to cripple the government budget and particularly is by cutting somewhere around 30% of a defense budget at this time of the year, Taiwan should increase its defense budget rather than reduce it. And particularly the United States wants Taiwan to before its defense, so that the US Taiwan military corporation can continue strengthen itself. And this is basically a very, very bad thing for Taiwan to have seen this happening. The interesting thing is, despite what KMT has been doing to Taiwanese government, there has been very little open criticism from the United States part.
Every politician tried to avoid criticize the KMT until very recently, Senator Dan Sullivan from Alaska in the hearing confirming Elbridge Kobe to a key Pentagon job had a very meaningful exchange in which both the senator and Mr. Kobe expressed extreme concern over Taiwanese legislative events unthinkable sabotage of government's budget. And that's actually a very good assignment. I think it is more and more American politicians and the government leaders should really voice their concern over what's going on in Taiwan. Fortunately, we have very good diplomat in Taiwan, Mr. Ray Green. So, Ray Green went on TV last week to openly reaffirm American's commitment of Taiwan's defense and to allow the historic TSMC deal with the United States and to assure the Taiwanese people and Taiwanese government that the Americans were behind them to preserve Taiwan's autonomy, to preserve Taiwan's economic prosperity and to enhance US-Taiwan relationship. But that's a very good sign.
Colin Tessier-Kay
Yeah, certainly reassuring to hear at least from that perspective that Taiwan still remains well supported. Moving now to our final topic today we look domestically to the US Congress. Republican lawmakers from the US House of Representatives pioneered principally by US representative Riley Moore of West Virginia, have introduced the STOP CCP Visas Act that will impose a ban on visas issued to Chinese nationals looking to study in the US. This is the latest legislative development. As our listeners may recall, Senator Dan Sullivan's PRC Students Act that was introduced back in December, 2024 that targeted student visas for PRC nationals. Miles, maybe, you can talk a bit about where these legislative moves are coming from, how they're significant and arguably why these measures are now critically necessary.
Miles Yu:
America woke up five, six years ago to discover that China is overtaken the United States in many key areas of national security issues. One of the most alarming things is that China has sent disproportionately large number of students to the United States to study to learn American technological know-how. And cutting-edge sciences over the last 30 years since the time of Deng Xiaoping knew that the Chinese system of education did not have academic freedom, which is the major reason why United States higher education is thriving. So, he outsourced the training of technical talent engineers, mathematicians to the United States, to Americans, universities, and colleges. So, the pattern has been that over these past couple of decades, somewhere around 35 to 40% of the entire American international student body are from PRC. And interestingly you might say, ah, people want study to have good life. I have no doubt about that.
However, the Chinese government is unlike most other government like India, send them unequally. Large number of students come over here, but when they're here, they're on their own. Mostly the Indian American students after the graduate from the United States and returning to India is only about 20% of them. However, several millions of Chinese students sent here to study. Close to 90% of them have returned to China to serve the Chinese government and the Chinese society, a Chinese industry. So, the result is that a couple of decades later today, the people who are leading China's defense industry, leading their technology fields are almost all trained in the United States. And we are enabling a foreign adversary. And this is basically the Frankenstein of our own making. It is against this background that the Congress is beginning to take action. You mentioned about Senator Donald Sullivan's legislation and this year, last week, there's another one.
I don't think you can totally ban all Chinese student visas, but definitely you should really, really dramatically reduce the number of student visa from China. Right now, as we speak, there are close to 300,000 Chinese students’ study in the United States, 300,000. But China does not want American students to study in China because they consider American interaction with their students, their academics as dangerous to the Chinese people because they don't want Americans go there to tell the wonders, the beauties of freedom and first amendment, academic freedom, that kind of stuff. So as a result, they created all kinds of obstacles, including national security law, including counter-espionage law to make American study in China miserable and untenable. The result is that while China has about 390,000 students in the United States as we speak today, March, 2025, there were fewer than 1000 Americans who study in China. You think about that number, that's incredibly unbalanced.
So just from the sheer point of view of reciprocity, we should dramatically reduce the student visa. And I think the congressman in his bill has certain logic to that and most importantly is really how, is really about how to protect the Americans Technological know-how as well because many of the Chinese students coming from the study in a very sensitive fields, and I think during Trump first term there was significant cutting down visas issue to Chinese national, to some of the sensitive fields. But that thing, there's a lot of loopholes because we're open society, colleges, universities do not work for the US government, so you cannot reorder them to do everything you want them to do.
Colin Tessier-Kay:
Yeah, and I think we will continue to track the bills progress through the house and of course other emerging legislation, as I'm sure there will be additional efforts to target soft exchange between the US and China moving forward. But we've unfortunately reached our time for this week. Miles, as always, thank you again for another enlightening conversation, lending us your analysis and insight into these critical issues. And we'll check back in with you again next week.
Miles Yu:
Alright, looking forward to it.