Taiwan will initiate a formal review of Taiwan Semiconductor Manufacturing Company’s (TSMC) investment in the United States, a move that has stirred global attention and raised concerns over its potential impact on the landmark $100 billion investment it has earlier pledged.
The review is set against a backdrop of intensifying U.S.-China geopolitical tensions and mounting pressure from Washington on TSMC to comply with export restrictions against Beijing.
Cabinet spokesperson Michelle Lee announced on Tuesday that the Taiwanese government would evaluate TSMC’s U.S. expansion plans in light of Taiwan’s strategic position in the global semiconductor industry.
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“The government’s stance on overseas investments is generally positive if they contribute to the globalization of Taiwan’s industry and enhance our overall competitiveness,” Lee stated, highlighting a cautiously balanced approach amid the complex geopolitical environment.
TSMC’s proposed investment, revealed just days earlier at the White House, involves constructing five additional semiconductor facilities in the U.S., primarily in Arizona. The announcement, made alongside U.S. President Donald Trump, underscored the deal’s significance to American economic and national security.
“Today, Taiwan Semiconductor is announcing that they will be investing at least $100 billion in new capital in the United States over the next short period of time to build state-of-the-art semiconductor manufacturing facilities,” Trump declared.
He emphasized the critical role of semiconductors in the modern economy, describing them as “the backbone of the 21st-century economy.”
U.S. Pressure and the China Factor
TSMC has been under sustained pressure from the U.S. to align with its strategic objectives, particularly concerning China. The Trump administration significantly intensified these pressures, with TSMC cutting off new orders from Huawei in 2020 to comply with U.S. sanctions. These measures were part of broader efforts to curb China’s technological and military advancements, and the Trump administration has maintained this firm stance.
This dynamic places TSMC in a challenging position, balancing its commercial interests with the geopolitical realities dictated by its largest market and strategic partner, the U.S. However, the implications of Taiwan’s review of the $100 billion investment remain unclear, adding uncertainty to an already delicate situation.
Potential Impact of Taiwan’s Review
The review process is expected to scrutinize how TSMC’s U.S. expansion aligns with Taiwan’s economic goals and whether it could weaken the island’s dominance in the global semiconductor market. Taiwan is the primary producer of the world’s most advanced chips, a critical advantage that not only bolsters its economy but also enhances its geopolitical leverage.
Analysts warn that Taiwan’s government may impose conditions to ensure TSMC’s strong domestic presence, potentially affecting the scale or pace of its U.S. projects. There is also speculation that Taiwan might seek assurances that key technologies and production capacities remain firmly rooted on the island.
Tariffs, Incentives, and National Security
TSMC’s U.S. investment is partly driven by President Trump’s tariff strategy, which threatened to impose a 25% levy on imported semiconductor chips. Additionally, the Biden administration’s CHIPS and SCIENCE Act of 2022 offered TSMC a $6.6 billion grant, reinforcing the financial viability of its American expansion.
For the U.S., bolstering domestic semiconductor production is not merely an economic move but also a national security strategy. Semiconductor chips are vital to technology, defense, and infrastructure sectors, and reducing reliance on foreign-made chips is a top priority for Washington.
Taiwan’s semiconductor industry is a cornerstone of its economy, with TSMC playing a pivotal role. The government’s review could be a message to TSMC to avoid over-committing resources abroad in ways that might undermine Taiwan’s technological leadership.