Taiwan's TSMC ramps up chipmaking in the US to avoid tariffs

"The effort to increase domestic semiconductor production is a wasteful, expensive, and ultimately futile exercise." Morris Chang, who turned 94 on July 10, has repeatedly stated that it is virtually impossible to achieve chip self-sufficiency, the stated goal of the world's major powers. Chang is the founder of the Taiwan Semiconductor Manufacturing Company, known worldwide as TSMC. The Taiwanese giant alone controls over 50% of the global chip manufacturing and assembly industry. It dominates almost completely in the most advanced chips, those smaller than 10 nanometers, where TSMC has a nearly 90% share.

The idea, or chimera, of semi-self-sufficiency is what TSMC is trying to sell to Donald Trump, who has long been pushing to move the Hsinchu giant's production to the United States. After announcing (in March) a massive $100 billion investment in five new factories, the company has decided to accelerate the construction of its second and third sites in Arizona by "several quarters." The goal is clear: to secure advanced chips for American tech giants like Apple, Nvidia, and AMD, curry favor with the Trump administration, and avoid tariffs on Taiwanese semiconductors, which could reach up to 100%. All this despite the company's awareness that the profitability of its investments in the US remains unclear.

To accelerate progress on the American front, the company is reportedly prepared to delay the construction of a second plant in Japan. The first Japanese site began producing chips last fall for customers like Toyota. Construction of the second plant was initially scheduled for early this year, as part of a $20 billion investment plan in the country that has led to over $8 billion in support pledged by the Japanese government. The delay risks being a severe blow to Japan, whose economy is beginning to feel the effects of Trump's 25% tariffs on automobile and steel imports. Tokyo had hoped to reach a trade deal with the United States, but negotiations have stalled, and 25% tariffs on all Japanese products are at risk of taking effect on August 1.

Washington's protectionist crackdown, combined with the global race for artificial intelligence, is pushing TSMC to diversify its production footprint. This is a necessary move to continue serving the US market, but one that raises concerns in Taipei: the "silicon shield," the cluster of factories that makes Taiwan strategic and difficult to attack, risks losing some of its deterrent value. Trump has promised to bring high-tech manufacturing back to America, accusing Taiwan of "stealing the business." This accusation is baseless. TSMC's empire-building has been encouraged by the United States itself.

After working for several decades in the United States in the nascent semiconductor sector, Chang arrived in Taiwan in the mid-1980s. Here, he accomplished his revolution. Until then, those who designed chips also manufactured them. Chang broke the dogma: TSMC doesn't invent, it doesn't design. It builds. But better than anyone else. Apple, Nvidia, and Qualcomm could focus on innovation, while TSMC manufactured for everyone, without competing. Like a Switzerland of silicon, neutral but essential. And the climb began. Within thirty years, the small foundry became a giant: over 50,000 employees, $90 billion in revenue by 2024, and a market capitalization of $885 billion.

No matter, the White House now wants a significant portion of those chips to be manufactured directly in the United States. TSMC, likely acting above the Taipei government, is willing to make concessions for two possible reasons. First, as mentioned, to avoid tariffs. Second, to establish a foothold elsewhere in anticipation of a potential crisis in the Taiwan Strait.

Not everyone in Taiwan is applauding. If the latest-generation chip factories were to be relocated abroad, the island would risk losing part of its strategic power. Yes, because chips aren't just business. They're also strategy, diplomacy, power. And, in Taiwan's case, a deterrent. For years, the so-called "sacred silicon mountain"—the microchip industrial complex, especially that of TSMC—has been considered a partial insurance against military action from mainland China, where the Taiwanese giant also maintains factories and a huge turnover.

In a recent meeting with the international press, Vice President Hsiao Bi-khim attempted to reassure: "Taiwan has a robust ecosystem of manufacturers and suppliers, which is difficult if not impossible to replicate elsewhere. We will continue to have a strategic advantage in the sector." But some fear it could lead to technology transfer to Intel, while the opposition speaks of a "selling off of the silicon shield as a protection tax." The downside is that, if one day there were a perception that Taiwan's chips could be dispensed with, a transnational US administration like Trump's could just as easily abandon Taiwan.