Taiwan Signals Global Chip Expansion Amid Pressure from US and EU Allies

Taiwanese officials and semiconductor executives are signaling a strategic pivot to globalize chip production, using their dominance in the AI supply chain to strengthen alliances while responding to pressure from partners like the United States and the European Union to diversify manufacturing.

A Strategy of 'Chip Diplomacy'

At the recent SEMICON Taiwan trade show, the island nation presented itself as a democratic and reliable technology partner for the global AI boom. President Lai Ching-te stated that Taiwanese companies were expanding internationally to "let resilience create shared prosperity," framing the island's technological strength as a product of democracy and the rule of law.

This approach, often termed "chip diplomacy," aims to leverage Taiwan's critical role in the semiconductor industry, which is dominated by firms like TSMC, to build international support amid ongoing geopolitical tensions.

US Investment and Tariff Tensions

The United States, a key ally, has been a primary driver of this diversification push. According to the report, Taiwanese firms are already making significant commitments:

• TSMC is investing $265 billion in new factories in Arizona.
• Other Taiwanese companies are planning an additional $20 billion of investment in the U.S., according to Economy Minister Kung Ming-hsin.

However, this cooperation is set against a backdrop of potential trade friction. U.S. Commerce Secretary Howard Lutnick recently told CNBC that semiconductor tariffs were being considered for companies that do not manufacture chips in the United States. This adds a layer of uncertainty, despite a deal struck earlier this year to reduce export tariffs in exchange for increased U.S. investment.

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Industry Acknowledges Global Shift

Taiwan's corporate leaders have publicly acknowledged the necessity of this geographic expansion. Young Liu, chairman of Foxconn, a major AI server maker for Nvidia, said companies must now "think about how to make with Taiwan, not in Taiwan; make with Taiwan in the country where the market is."

Echoing this sentiment, Tien Wu, chief operating officer of ASE, the world's largest chip packaging and testing firm, called the move politically correct. "And honestly, I don’t think we have a choice not to do that," Wu stated during a panel discussion, as reported by Reuters.

Courting European Partners

Taiwan is also actively strengthening its ties with the European Union, which is similarly eager for Taiwanese investment to bolster its own chip-making capacity. A European Commission official, Kilian Gross, attended SEMICON to promote the bloc’s "Chips Act 2.0" to Taiwanese firms.

Deputy Foreign Minister Francois Wu emphasized the shared values between Taiwan and European nations like France, stating, "We use technology to connect with the world, not to control it." This underscores Taiwan's effort to position itself as a strategic partner for democratic nations concerned about supply chain security.