Global leader: A visitor looks around the TSMC Museum of Innovation in Hsinchu, Taiwan. The firm’s products are crucial to maintaining the United States lead in the artificial intelligence race. — AFP
IT’s exceedingly rare that tech giants are also pillars of democracy; more often they’re on the opposite end of that spectrum. But for many people in Taiwan, the dominance of its chipmaking powerhouse Taiwan Semiconductor Manufacturing Co is dubbed the “holy mountain” guarding the nation from the growing threat of a Chinese invasion.
TSMC is at the heart of this so-called silicon shield, or the idea that the island’s crucial position in the global semiconductor supply chain will deter a Beijing invasion. The political reality is more nuanced.
As former TSMC chairman Mark Liu put it: “China will not invade Taiwan because of semiconductors. China will not not invade Taiwan because of semiconductors.”
But as Donald Trump prepares to return to the White House and the United States continues to identify Beijing as its greatest strategic threat, the new administration should be working with the Hsinchu-based chips manufacturer, recognising that its success as mutually beneficial for America and Taiwan.
In the absence of official diplomatic ties, TSMC will increasingly have to take on the role of de-facto diplomat for the island. Its dominance in cutting-edge chip production gives the company unique leverage in navigating Trump’s transactional approach to foreign affairs.
The president-elect has stoked anxiety in Taipei over how he’d handle threats from Beijing. Trump falsely suggested that Taiwan “stole” its chips business from the United States.
He believes that he can use tariffs to bring manufacturing back. He has also said that the island should pay for its defence.
When asked if he would use military force against a blockade of Taiwan, the incoming commander-in-chief said in October, “I wouldn’t have to, because (Xi Jinping) respects me and he knows I’m crazy.”
The rhetoric is undeniably unsettling, as is the uncertainty sowed by the threat of a new trade war and tariffs on all goods imported to the United States.
But it’s likely that TSMC will be able to avoid punishing tariffs due to its global position as a leader in cutting-edge semiconductors that the United States can’t currently acquire at scale elsewhere.
The firm’s products are crucial to maintaining the United States lead in the artificial intelligence race. Its two biggest customers are Nvidia Corp and Apple Inc, the latter of which was able to negotiate with Trump to avoid tariffs during his first term. The former has said it wouldn’t exist today without TSMC.
All this antagonism toward Taiwan and its chip industry is only damaging US tech ambitions. TSMC has also been supporting US efforts to hold China’s innovation back.
In 2020, it complied with US orders to cut off Huawei Technologies Co, which was then its second-largest customer.
More recently, it severed ties with another Chinese firm after it emerged that one of its chips had still found its way into a Huawei device.
Trump and his allies should recognise the company is a critical partner to the United States tech industry, even if Elon Musk’s Tesla Inc has business interests in China.
Musk has repeatedly angered Taipei, striking a nerve by equating Taiwan to the Hawaii (50th state) of China and reportedly urging SpaceX suppliers to relocate due to geopolitical concerns.
TSMC, meanwhile, has quietly shown that it does not play around when it comes to business leaders planting seeds of doubt about Taiwan’s future.
The company reportedly scrapped a lucrative discount it was offering Intel Corp after chief executive officer Pat Gelsinger made a series of comments questioning the stability of Taiwan. TSMC is also at the centre of US endeavours to onshore semiconductor manufacturing.
The Biden administration has spent some of its last weeks in office ensuring federal funding still flows to TSMC’s efforts to bring chip manufacturing to Arizona.
Trump has called the deal “so bad,” but it’s also likely he will end up taking credit for it.
While initially costly and plagued with labour issues and culture clashes, there are some early signs that the Arizona factory can be successful.
This partnership would be a win for both TSMC and the United States. The company’s broader international expansion into Japan and Germany can help strengthen the silicon shield by forging greater ties with US allies.
The diversification carries other benefits: Even without a Chinese invasion, anything that blocks the supply of chips from Taiwan could be devastating for the company and to global tech supply chains – such as a blockade, natural disaster or pandemic.
TSMC has historically seen benefits from producing in Taiwan in part due to the proximity to an ecosystem of suppliers and critical inputs, but expanding in the United States brings the company and the Taiwanese people closer to Americans.
TSMC may be the crown jewel of Taiwan, but it was started by Morris Chang, an American.
“Ever since I fled Communist China and went to the United States and became naturalised in 1962, my identity has always been American, and nothing else,” the legendary founder said in an interview last year.
This sounds about as “America First” as you can get, and should be a wake-up call to Trump that the industry was never stolen by Taiwan. They’re on the same team. — Bloomberg
Catherine Thorbecke is a Bloomberg Opinion columnist covering Asia tech. The views expressed here are the writer’s own.
