The global semiconductor industry is undergoing a significant shift as Taiwan Semiconductor Manufacturing Company (TSMC), the world's leading chipmaker, expands its manufacturing footprint beyond Taiwan. This move, driven by a combination of customer demand, geopolitical pressures, and incentives from the United States, has sparked both optimism and concern regarding its potential impact on Taiwan's economy and security.

TSMC's recent announcement of a $100 billion expansion plan to build factories in the United States adds to its existing investments, bringing the total to $165 billion. This substantial commitment includes the construction of three new fabrication plants, two advanced packaging facilities, and a research and development center, marking it as the "largest single foreign direct investment in US history." While TSMC Chairman CC Wei and Taiwan's President Lai Ching-te maintain that these investments are primarily driven by customer demand, the influence of US policies, particularly those championed by former President Donald Trump, cannot be ignored.

Trump, during his presidency, accused TSMC of "stealing" the US chip industry and advocated for bringing chip production back to American soil. His administration, and later President Biden's, offered incentives such as the CHIPS and Science Act, which provides government subsidies for chipmaking in the US. Trump also floated the idea of imposing tariffs on chips manufactured in Taiwan, potentially reaching as high as 100%, to further incentivize domestic production.

The expansion of TSMC's production to the US has raised concerns in Taiwan about the potential weakening of its "silicon shield." This term refers to Taiwan's crucial role in the global semiconductor supply chain, which has historically served as a deterrent against potential aggression from China. Taiwan currently dominates global semiconductor manufacturing, producing approximately 60% of the world's chips, with TSMC playing a pivotal role in maintaining this dominance.

The opposition party Kuomintang (KMT) has criticized President Lai, arguing that allowing a foreign government to weaken the silicon shield could lead to a hollowing-out of Taiwan's high-tech industry and endanger national security. Concerns have been voiced about the economic rationality of producing chips in the US at a higher cost and the long-term security implications of shifting advanced chip production away from Taiwan.

Despite these concerns, experts like Chiang Min-yen from the Digital Society and Technology Research Center (DSET) believe that Taiwan will remain the dominant force in semiconductor production for the foreseeable future. He notes that even with advancements in technology, the completion of US-based facilities capable of producing 2-nanometer chips is not expected until 2027 or 2028. Taiwan, with its decades of experience and continuous technological advancements, maintains a significant advantage.

Furthermore, TSMC's investments extend beyond the US, with factories also being built in Germany and Japan. These global expansions reflect a broader strategy to diversify production and mitigate geopolitical risks. However, the focus remains on the balance between meeting customer demand, responding to political pressures, and safeguarding Taiwan's economic and security interests.

As the global semiconductor landscape evolves, Taiwan must carefully navigate the challenges and opportunities presented by these shifts. Maintaining a critical perspective on US policies, engaging in negotiations based on mutual security and interests, and continuously innovating in semiconductor technology will be crucial for preserving its position as a key player in the global supply chain.