Is TSMC investment in U.S. good for Taiwan?

Mark O'Neill April 01, 2025 10:55

On March 3, less than six weeks after taking office, a beaming Donald Trump stood in the White House and announced that Taiwan Semiconductor Manufacturing Company (TSMC) would invest US$100 billion in his country.

“I do not make announcements for every company,” he said. “But I am making this one personally.” With good reason – it is the largest ever foreign direct investment in the U.S. and will create 40,000 construction jobs and tens of thousands of well-paid high-tech jobs over the next four years.

Trump was standing next to TSMC Chief Executive C.C. Wei (魏哲家). After the news, TSMC’s ADR shares fell by 2.64 per cent and its stock price in Taiwan fell below NT$1,000.

A great deal for Trump and the U.S. – a good deal for Taiwan? Its people asked if the investment would hollow out the semi-conductor industry at home. If the U.S. could produce at home the chips it needed, why would it protect Taiwan against a Chinese attack?

To address these issues, Wei held a news conference just three days later in Taipei with President Lai Ching-te (賴清德).

“Every new production site is built in response to customer demand and this investment is being made because demand from American customers is exceptionally strong,” said Wei. Apple, NVIDIA, AMD and Qualcomm are among TSMC’s top six customers.

“Our R & D facility in the U.S. will not affect TSMC’s investments in Taiwan,” he said.

Taiwan’s representative in Japan, Lee I-yang (李逸洋), addressed the issue more directly. “The U.S. is the world’s strongest hi-tech country but is weak in producing advanced chips. If it does not improve, it will be in a weak position competing with China.

“Its desire to establish an advanced chip industry will require steady development for the next 20-30 years. It will need the constant help of TSMC. So the U.S. will not allow China to attack Taiwan,” he said.

“Taiwan people must have confidence in TSMC. This investment will absolutely not weaken the value of the company. It has an R & D centre in Taiwan with 8,000 engineers. Its key technologies are all in Taiwan. It will use Taiwan as its base to support its U.S. plants,” he said.

The new investment is in addition to the US$65 billion it is already investing in a plant in Phoenix, Arizona. Early this year the plant began mass production of four nanometre chips. The new investment includes plans for three new fabrication plants, two advanced packaging facilities and a major R&D team centre.

For several years, Trump has accused TSMC of “stealing” the U.S. semiconductor industry. This is the opposite of the truth.

In 1990, the U.S. accounted for 37 per cent of global chip production, and Taiwan two per cent. In 2023, the U.S. produced two per cent and Taiwan 46 per cent.

This transformation happened because the U.S. companies that were the biggest customers chose to outsource manufacturing to Japan, South Korea and Taiwan where it was cheaper.

In 1985, Morris Chang founded TSMC to meet this demand. His business model was only to produce for outside clients. The majority were American.

TSMC became a success because Chang found highly educated engineers willing to work up to 80 hours a week on production lines, as were those in Japan.

In the U.S., where Chang had worked for the previous 30 years, he found that engineering graduates were unwilling to work in factories. They preferred R & D, marketing or business.

Similarly, the firm has found it impossible to replicate Taiwan levels of worker and engineer dedication at its Arizona plant.

This bodes well for the future in Taiwan. Only there will it be able to create the optimal conditions to develop the newest and most sophisticated chips and the supply lines they need.

The consensus in the industry is that TSMC had no alternative but to make a major new investment in the U.S. during the Trump presidency, to protect itself from punitive tariffs and win his goodwill and U.S. military support against a Chinese attack.

Lee I-yang said: “Taiwan, Japan and the U.S. will work together to create value in the semi-conductor sector and hi-tech development, for their economic security. They are the closest partners to protect the Taiwan Straits, East Asia and the Indo-Pacific.

“The priority for the U.S. is the Indo-Pacific and most important is the Taiwan Strait. The U.S. navy can deploy there aircraft carriers and F-35B fighters and other advanced weapons,” he said.

Are semi-conductors the best weapons for Taiwan against an attack by Beijing?

Mark O'Neill

A Hong Kong-based writer, teacher and speaker.