Taiwan will lose protection if it fails to move semiconductor chip manufacturing to the United States. The nation must determine which is more valuable—US protection against Chinese threats or maintaining 95% of the world’s chip production.
The Taiwan Semiconductor Manufacturing Company (TSMC) agreed to invest $100 billion in manufacturing plants in the US earlier in the year, but that has not been a sufficient deal for the current administration. Cornering 95% of the market, the US cannot risk losing its main semiconductor manufacturer in the event that China fulfills its promise to absorb Taiwan as a Chinese province.
US Commerce Secretary Howard Lutnick admitted it is a “herculean task” to move 95% of the world’s chip production 9,000 miles away. “The model is: if you can’t make your own chips, how can you defend yourself, right?” Lutnick argued. Only 2% of Taiwan’s chip manufacturing occurs on US soil.
Nvidia CEO Jensen Huang said it could take up to two decades for supply chain independence, adding, “It’s not a really practical thing for a decade or two.” TSMC has emphasized that its most advanced processes will remain in Taiwan to preserve the “silicon shield”—its economic leverage against Chinese aggression. America will need to guarantee securities to Taiwan, otherwise, what good is it to move production? US facilities will begin to focus on mid-to-high-end nodes that should meet 30% to 50% of US consumer demand by 2030. However, Taiwain demands that the overall global supply remain on the island.
President Tsai Ing-wen is wanted by the Chinese government for defying the One China policy. He has been eager to form a strong alliance with the US as he knows China can only be kept at bay for so long. “In the face of authoritarian expansionism and the challenges of the post-pandemic era, Taiwan seeks to bolster cooperation with the United States in the semiconductor and other high-tech industries. This will help build more secure and more resilient supply chains. We look forward to jointly producing democracy chips to safeguard the interests of our democratic partners and create greater prosperity,” Taiwan’s president stated in 2024.
Trump told Taiwan that it must raise its own defense budget from 2.45% of GDP to around 10%. He has likened America to “an insurance company” for Taiwan and believes the nation should pay for protection.
A large semiconductor chip manufacturing just so happened to host a conference at the same venue in Orlando, Florida, where we held the World Economic Conference in 2024. An employee of mine spoke with one attendee who said shareholders were concerned that their manufacturing headquarters were located in Taiwan. I’m told the general consensus was that even in the event of China following through with its One China policy, the company believed that China would not want to lose such a lucrative business deal with the United States. Yet, what would happen if two nations were at war? Cutting off America’s supply of semiconductors would cripple the tech industry.
Nvidia, Advanced Micro Devices (AMD), Broadcom, Intel, MediaTek, Qualcomm, and others, with North America purchase over 65% of Taiwanese chips. The US-China tensions and Taiwan’s fragile geopolitical position make “Made in Taiwan” a risky bet for Western countries despite the critical importance of its semiconductor manufacturing. Taiwan must decide if the risk of foreign invasion is surrendering half of its share of production.