Key facts
- Taiwan is leveraging its semiconductor industry as a diplomatic tool, particularly in the context of the AI revolution.
- The island faces U.S. pressure to increase domestic chip manufacturing, with TSMC investing significantly in Arizona.
- Taiwanese companies are exploring global expansion, aiming to "make with Taiwan" rather than solely "in Taiwan."
- The European Union is also seeking increased investment from Taiwanese chip firms.
- Taiwan emphasizes its democratic values and rule of law as foundations for its chip strength.
Taiwan is actively employing its significant semiconductor capabilities as a form of "chip diplomacy," aiming to bolster international support and partnerships amidst geopolitical pressures. At the SEMICON Taiwan trade show, the island positioned itself as a reliable and democratic supplier crucial for the ongoing AI revolution.
President Lai Ching-te highlighted that Taiwanese companies are expanding globally to foster "shared prosperity," emphasizing that the island's chip strength is rooted in its democratic values and rule of law. This strategic outreach comes as Taiwan faces pressure from the United States, its key international backer, to increase chip manufacturing within the U.S. TSMC, a cornerstone of Taiwan's semiconductor industry, is already investing substantially in new facilities in Arizona.
Economy Minister Kung Ming-hsin announced that Taiwanese firms are planning an additional $20 billion in investments within Taiwan. Earlier this year, Taiwan secured a deal with Washington to boost U.S. investment in exchange for reduced export tariffs, though uncertainties remain regarding potential U.S. semiconductor tariffs for companies not manufacturing domestically, as indicated by U.S. Commerce Secretary Howard Lutnick.
Industry leaders acknowledge the necessity of diversifying manufacturing bases. Young Liu, chairman of Foxconn, suggested a shift towards "making with Taiwan, not in Taiwan," a sentiment echoed by Tien Wu, COO of ASE, who stated that expanding manufacturing abroad is politically prudent and practically unavoidable.
Beyond the U.S., Taiwan is also pursuing deeper engagement with the European Union, which seeks greater investment from Taiwanese companies. This aligns with shared geopolitical interests, including mutual support for Ukraine and ongoing trade and diplomatic challenges with China. Taiwan's Deputy Foreign Minister Francois Wu underscored shared democratic values with France, stating, "We use technology to connect with the world, not to control it."