After the Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest chipmaker, announced a $100 billion (€92 billion) expansion plan to build factories in the United States, concerns are mounting that offshoring production could weaken the self-ruled island's leverage in securing protection against China.

TSMC is the primary producer of many advanced semiconductors used in everything from smartphones to fighter jets. However, as China has vowed to "reunite" Taiwan with the mainland, by using force if necessary, the vulnerability of global semiconductor supply is a key strategic factor.

With this in mind, President Donald Trump, and former President Joe Biden before him, have both called for bringing advanced chip production to the United States.

While campaigning for his second term in office, Trump, without providing evidence, accused TSMC of "stealing" the US chip industry.

In 2020, TSMC announced billions of dollars in investment to build chip foundries in the southwestern US state of Arizona. After delays and more cash infusions, the first plant there began production in 2024. A second is due to begin production in 2028.

Including last week's announcement, TSMC's total investment in the United States now amounts to $165 billion.

In a press conference, TSMC chairman CC Wei and Taiwanese President Lai Ching-te both insisted that the $100 billion investment expansion in the United States was not caused by pressure from Trump.

"Whenever TSMC builds a production line outside Taiwan, it is always driven by customer demand," Wei said, while assuring that the company's most advanced technology would remain on the island.

In the press release announcing the investment, Wei said Trump's "vision and support" in 2020 was behind TSMC's "embarking on establishing advanced chip manufacturing in the United States."

The company said its expansion would amount to the "largest single foreign direct investment in US history" and include three new fabrication plants, two advanced packaging facilities and a R&D center.

"I think TSMC wouldn't have upped their investment without Trump's pressure," Antonia Hmaidi, a geopolitical technology analyst at the Mercator Institute for China Studies (MERICS), told DW.

Chiang Min-yen, an economic security researcher at the Research Institute for Democracy, Society and Emerging Technology, a Taiwanese think tank, told DW that, although TSMC's move was "not entirely the most economically rational choice," it was a "necessary adjustment in response to global tech geopolitics."

Maintaining Taiwan's 'silicon shield'

For many Taiwanese people, it is unclear how producing chips in the United States at a higher cost will yield a return on investment.

Moreover, while the Taiwanese government lauded the latest deal as a "historic moment" for bilateral ties with the United States, it has not addressed concerns about Trump's tariff threats or the long-term security provided by the "silicon shield."

The term refers to Taiwan's indispensable role in the global semiconductor supply chain, which could help in deterring a potential invasion by China.

Taiwan dominates global semiconductor manufacturing by producing about 60% of the world's chips, with TSMC being the biggest contributor to maintaining this technological advantage.

When the latest deal was announced along with Trump's victorious declaration that "the most powerful AI chips in the world will be made right here in America," alarm bells went off across Taiwan.

The opposition party Kuomintang criticized President Lai for allowing a foreign government to weaken the silicon shield, warning that shifting advanced chip production to the United States could lead to a hollowing-out of Taiwan's high-tech industry and endanger national security.

"I think fundamentally, this move is really designed to make sure that US companies have high-end chips available if there's a blockage around Taiwan," said Hmaidi, from MERICS.

Researcher Chiang said that, even with overseas expansion, Taiwan-based semiconductor production would remain dominant for the foreseeable future.

"Based on the current construction process in the US, even if technology advances to 2-nanometer chips, completion is expected between 2027 and 2028. Meanwhile, Taiwan has accumulated decades of experience [...] with continuous technological advancements," he said.

"The idea of the most advanced technology being transferred is not feasible," he said.

TSMC has also invested in factories in Germany and Japan. 

Taiwan braces for Trump's looming tariffs

Before TSMC's investment announcement, Trump indicated plans to raise tariffs on chips manufactured in Taiwan to as much as 100%, claiming the tactic would serve as an incentive for companies to bring chip production to the US.

Even after TSMC's investment expansion, Taiwanese semiconductor companies could still face new rounds of tariffs, which Trump is expected to announce on April 2, analysts said. But the direct impact on TSMC may be limited.

"The US doesn't directly import many chips from Taiwan — it mostly imports finished electronic products, like cars and consumer electronics," Chiang said.

Chiang warned that Taiwan must remain "critical" of Trump's next moves and actively engage in negotiations based on mutual security and interests.

"Whether it's Biden's CHIPS and Science Act or Trump's policies, both aim to expand US domestic manufacturing," he said, referring to a law signed by the former president that provides government subsidies for chipmaking on US soil.

Trump has blasted Biden's policy as "giving away" money, insisting that chipmakers need "incentives" such as tariffs to build on US soil.

"Taiwan should ask itself: What kind of chip supply chain strategy best serves its own interest?" Chiang said.

So far, Trump has not overtly indicated an official stance on US security support to Taiwan, other than repeating that Taiwan should pay more to the United States for providing defense against China. 

DW's reporter Yu-Chun Chou contributed to this report

Edited by: Wesley Rahn