Taiwan and the Silicon Shield: The Case of Semiconductors & Taiwan’s Geopolitical Safety
The Taiwan Semiconductor Manufacturing Company’s (TSMC) recent announcement of its $100 billion investment into new semiconductor facilities in Arizona has garnered significant attention, with its expansion plan marking a new chapter for the global semiconductor industry. Semiconductors—which are found in a vast array of items, including personal electronics like mobile phones and laptops, as well as advanced military technology and artificial intelligence systems—are increasingly viewed as a strategic resource critical to national security and the global economy.
Shifting Regional Dynamics: The U.S. and Taiwan
Taiwan has been a dominant force in the semiconductor industry for decades, with TSMC producing around 90% of the world’s most advanced chips. However, President Trump has been vocal in his criticism of Taiwan's dominance in the semiconductor supply chain, claiming that the island "stole" the U.S. chip business. From the U.S. perspective, TSMC’s establishment of semiconductor plants in Arizona is seen as a way to reduce reliance on Asian manufacturing while also creating thousands of jobs domestically.
In an attempt to boost domestic chip manufacturing in the U.S., Trump has also threatened to impose 25% tariffs on semiconductor imports. Meanwhile, the CHIPS and Science Act, passed under the Biden administration in 2022, allocated $52.7 billion to support semiconductor production in the U.S. The question now is whether TSMC will be exempt from these potential tariffs and how U.S. semiconductor policy might evolve under Trump, who has recently condemned the CHIPS Act, calling it a “horrible, horrible thing.”
The Silicon Shield and Domestic Debate
In Taiwan, TSMC’s planned investment has faced criticism from some opposition party officials, who are concerned about the island’s security and geopolitical significance. They argue that relocating Taiwan's advanced manufacturing capabilities to the United States could weaken its strategic leverage as a “silicon shield”--- a term referring to the protection Taiwan gains from its role in global supply chains and its importance to key international stakeholders, including the United States. Former President Ma Ying-jeou alleged that Taiwan’s ruling Democratic Progressive Party essentially “sold” TSMC to Trump as a “protection fee,” implying that it sacrificed its technological edge for a security guarantee.
Taiwan’s president, Lai Ching-te, however, has denied that TSMC was pressured into the deal, Both Lai and TSMC CEO, CC Wei, instead view the investment as an opportunity for greater international cooperation, as well as a solution for increased consumer demand. They also clarified that Taiwan’s most advanced semiconductor technologies would remain in Taiwan.
Implications for the Indo-Pacific
TSMC’s expansion extends beyond a bilateral issue between the U.S. and Taiwan. The semiconductor supply chain industry is critical in the Indo-Pacific region, with countries like South Korea, China, and Japan all playing pivotal roles. This investment could encourage these countries to consider strengthening their semiconductor industries to counterbalance China’s growing influence in the region.
Conclusion
TSMC’s expansion raises questions about the future of Taiwan’s “silicon shield” and the evolving global semiconductor supply chain. While the investment seemingly strengthens U.S.-Taiwan relations, it also presents risks for Taiwan’s strategic leverage and potentially its geopolitical security. If China feels threatened by TSMC’s closer alignment with the U.S., it may intensify pressure on Taiwan. It is therefore crucial for Taiwan to safeguard its geopolitical security by retaining control over its most advanced semiconductor technologies.