Brian Hioeby Brian Hioe
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Photo Credit: Gage Skidmore/Flickr/CC BY-SA 2.0
TAIWANESE SEMICONDUCTOR manufacturing giant TSMC announced today that it intends to invest 100 billion USD in the US over the next four years. TSMC’s plans for investment were announced jointly by the company and US president Donald Trump, who suggested that TSMC could avoid the tariffs he has threatened to impose on Taiwanese semiconductors with the deal, though it is unclear how that would work out as an investment framework.
According to TSMC chair CC Wei, the investment will be for a research and development center, two advanced packaging plants, and three chip fabrication plants. TSMC will be expanding from its current presence in Arizona then, where it has built three advanced wafer fabs.
TSMC first announced a 12 billion USD investment in its Arizona facilities during Trump’s first administration. This increased by 65 billion USD in investment under the Biden administration, with assistance provided by billions of dollars in subsidies under the CHIPS Act.
With Trump having lashed out at the CHIPS Act as a failed initiative of Biden’s that gave away money to foreign companies in the past, it is unclear whether he will provide subsidies to TSMC. Trump has since purged CHIPS Act staff. American companies such as Intel also received funds under the CHIPS Act, though the ousting of Intel CEO Pat Gelsinger late last year was seen as an admission by Intel that its plans to displace TSMC from its current dominance over semiconductors have failed.
It can be seen that TSMC’s growing investment in the US began during Trump 1.0 and has continued under Trump 2.0. This continues the broader pattern of TSMC, which historically hoped to keep out of the public eye and did not want to take sides in global geopolitical tension, increasingly siding with the US over China. TSMC has been forced to take sides in an era of political, economic, and geostrategic competition between the US and China, a part of which has to do with that the company’s rootedness in Taiwan is because it derives advantages from the Taiwanese government also aiming to keep the world invested in Taiwan’s defense through maintaining reliance on Taiwanese semiconductor manufacturing.
It is unclear whether the investment plan will placate Trump, who has lashed out at Taiwan as “stealing” American semiconductor manufacturing in the past and suggested that Taiwan should pay the US for its defense.
TSMC Arizona’s fab. Photo credit: TrickHunter/WikiCommons/CC BY-SA 4.0
Before the investment announcement, Trump claimed that he would tariff Taiwanese semiconductors by 100%. This would not have helped American businesses, who themselves use Taiwanese semiconductors.
Nor would it have allowed US companies to step up to pick up the slack. After all, fabs are billion USD investments, and TSMC is many years ahead of its competition in terms of producing advanced chips, producing over 90% of advanced chips and over 60% of global supply. It is, of course, a question as to whether Trump understands the intricacies of the global semiconductor supply chain, given that he is famously fact-averse and numbers-averse.
But Trump may enjoy the optics of manufacturing returning to the US, in line with broader political stylings. A broader political narrative that presents America as the winner of dealmaking with TSMC–and Taiwan as the loser–is most likely to convince Trump.
It is not clear whether Trump will be persuaded that America should defend Taiwan militarily after the TSMC deal either. One way of looking at the investment plan is that this is, in fact, Taiwan paying the US for its defense–never mind that the US already financially profits from the arms it sells to Taiwan. Where Trump moves next is to be watched carefully, with Trump sometimes still suggesting commitment to strategic ambiguity, even as there are moves by Republicans under his tenure to call for US recognition of Taiwan.
Still, the investment plan is likely to be attacked by the KMT, in line with other criticisms of TSMC investment in the US that have already been expressed. Namely, the pan-Blue camp has developed a political narrative in the past few years that suggests the DPP has “given away” TSMC to the US as a free gift, even though this will undermine global reliance on Taiwan and, in turn, weaken the political and economic incentive for other countries to defend Taiwan.
The challenge facing the Lai administration, then, will be how to frame the TSMC investment as a win for Taiwan in terms of expanding TSMC’s overseas presence and influence, as well as placating Trump. The Lai administration will likewise have to convince the Taiwanese public that this will not kill the golden goose in the form of TSMC losing its most advanced processes to the US and, in this way, remove supply chain reliance of the US on Taiwan. And, on top of this, the Lai administration will have to simultaneously convince Trump that the US is the only winner of TSMC investing in the US, rather than that this is a win-win scenario–Trump’s view of dealmaking after all, as observed in the testy exchange between him, US vice president JD Vance, and Ukrainian president Volodymyr Zelenskyy over the weekend–is primarily one of one-way coercion.