When Donald Trump announced Taiwan Semiconductor Manufacturing Company's $100 billion investment in the US, the mood in Taiwan, more than 11,000 kilometres from Washington, was far from celebratory. As analysts and some politicians point out, Taipei wants to curry favour with the US president with this transaction.
TSMC produces over 90% of the world's advanced microchips. They are literally in everything: from smartphones to AI. The company, in addition to the three production plants in Arizona promised to the Biden administration, will build two chip packaging plants and a research and development center, the main goal of which is to improve the technology of the production process.
Taiwanese President Lai Ching-te assured that “Taipei did not feel any pressure from Washington” in concluding the agreement. The reason for the company's greater involvement in the United States was supposedly the successively increasing demand from American customers, such as Apple, Nvidia, AMD, Qualcomm and Broadcom. Big tech wanted to ensure security of supply in this way, by simply ordering production “in-house”.
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At the same time, the company's CEO emphasized that TSMC's investments in the US will not undermine its commitment and planned expansion in its home base. “The development of cutting-edge technology for producing next-generation chips will remain in Taiwan and will still be 10 times larger than the plants in the US,” he said in a statement.
Is the “silicon shield” crumbling?
– This is a serious crisis that threatens national security – warned former Taiwanese President Ma Ying-jeou on Facebook. And he predicted that this transaction would shake citizens' trust in American friendship towards the island and its future geopolitical situation.
Why is this so important? Some Taiwanese believe that the company is a “silicon shield” that deters Chinese invasion. And let's not kid ourselves – Beijing is increasingly talking about its planned return to the motherland of the rebellious island, while at the same time intensifying military operations around it (i.e. naval exercises and fighter flights).
Taiwan's security is inextricably linked to the guarantees provided to it by the United States. According to the agreement, the United States is legally obligated to provide the island with the means to defend itself against a potential attack by China. However, as analysts from CNN News point out, Trump's rhetoric may have shaken the belief that these agreements are worth anything. The current president has repeatedly accused Taiwan of “stealing the semiconductor market,” while noting that it “should pay for protection.” Sounds quite similar to the arguments made against Ukraine and the European Union?
“Today Ukraine, tomorrow Taiwan”
As they comment on CNN News, Trump is “a dealer who will treat Taiwan like Ukraine. He recently told Zelensky that he had no cards to play, and now Taipei has gotten rid of its own. TSMC was the best bargaining chip.” Others point out that everyone is currently paying the US for protection: NATO countries with orders, Ukraine with rare minerals. “This is the new reality in international politics,” they add.
The current administration has repeatedly emphasized that it wants to reduce involvement in European security in order to focus more on Asia and the threat from China.
Or maybe a nimble dodge?
TF International Securities analyst Ming-Chi Kuo praised TSMC's move. “This is the most successful negotiation with the Trump administration to date,” he noted. In his opinion, while the $100 billion investment seems huge, the lack of details provides flexibility, mitigating the impact on profitability.
Eric Chen of market research firm Digitimes Research said the deal had eased Trump's concerns. Although, of course, there's no telling when he'll change his mind again. “And yet his behavior is known for its sudden twists and turns,” he added.
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