Rising concerns in Taiwan over TSMC’s Arizona investment

[WORLD] Taiwan Semiconductor Manufacturing Company (TSMC), the world's leading semiconductor manufacturer, has long been a cornerstone of Taiwan's economy and technological prowess. However, recent developments have raised concerns in Taiwan regarding TSMC’s plans to invest heavily in the United States, particularly in Arizona. The company’s pledge to build a state-of-the-art chip manufacturing facility in the American Southwest has sparked debate in Taiwan, as many worry about the implications for the island's security, its role in global chip production, and its delicate relationship with China.

This article explores the reasons behind the growing concerns in Taiwan regarding TSMC’s decision to invest in Arizona, its potential impact on Taiwan's economy, and the broader geopolitical ramifications.

TSMC’s Expanding Global Footprint

As the global leader in semiconductor production, TSMC has long been the backbone of Taiwan’s semiconductor industry. The company produces cutting-edge chips used in everything from smartphones to advanced military systems. With a 50% share of the global foundry market, TSMC is indispensable to Taiwan's economic success and global technological standing.

However, TSMC's strategic shift towards investing in the United States has brought new challenges. In 2020, TSMC announced plans to build a $12 billion semiconductor plant in Arizona, marking a significant departure from its traditional reliance on Taiwan. The new plant is part of a broader push by the United States to boost its domestic chip manufacturing capacity, reduce dependence on foreign production, and ensure supply chain security in the face of global tensions, particularly with China.

Taiwan’s Economic Concerns: Losing the Edge?

The decision to expand operations in Arizona has raised alarm bells in Taiwan, where TSMC is seen as not just a national asset but a key pillar of the island's technological and economic strength. Taiwan’s manufacturing dominance in the semiconductor sector has made it a vital player in global technology supply chains. With TSMC now investing heavily in the U.S., some in Taiwan are concerned that the company’s expansion abroad could diminish Taiwan’s position as the global leader in semiconductor manufacturing.

"Taiwan is highly dependent on TSMC’s success. Any potential loss of market share or technological advantage could hurt Taiwan’s global standing," says an analyst in Taiwan, reflecting the economic anxiety surrounding TSMC’s foreign investments.

The concern stems from the possibility that TSMC might eventually shift more production outside Taiwan, particularly to its Arizona facility. This could reduce Taiwan’s dominance in the semiconductor market and weaken the country’s leverage in international trade negotiations.

The Geopolitical Landscape: A Delicate Balance

Beyond economic worries, Taiwan’s concerns about TSMC’s investments in Arizona are also tied to the broader geopolitical context. Taiwan's relationship with China, which views Taiwan as a breakaway province, has long been a source of tension. China has consistently pressured global companies and nations to sever ties with Taiwan and reduce their dependence on Taiwanese technology.

"TSMC’s investments in Arizona raise questions about Taiwan’s position in the global chip supply chain, especially as it continues to face increasing pressure from China," explains a political expert based in Taipei.

While TSMC has maintained its commitment to Taiwan as its core production hub, the growing global political pressures are evident. As tensions between the U.S. and China continue to rise, TSMC’s investments in the United States may be seen as a hedge against potential future disruptions to Taiwan's semiconductor industry due to political instability. Yet, some in Taiwan view this as a signal that TSMC may be looking to diversify its operations in preparation for potential risks in the Taiwan Strait.

Taiwan’s Security Dilemma: The China Factor

One of the central reasons behind Taiwan’s concern over TSMC’s Arizona plant is its potential implications for Taiwan's security. As the primary supplier of chips to the world, Taiwan has long been a target for China’s geopolitical ambitions. China views Taiwan as part of its territory, and the threat of military action to reunite Taiwan with the mainland remains a serious issue.

"In a worst-case scenario, Taiwan’s semiconductor industry could become a target. The more TSMC spreads its manufacturing operations globally, the less reliant Taiwan might become on the company, which in turn could reduce Taiwan’s ability to leverage its chip manufacturing dominance for security purposes," says a source in the Taiwanese government.

If tensions between China and Taiwan were to escalate, TSMC’s facilities in Arizona might be perceived as a safer alternative to Taiwan-based production, which could be at risk of disruption. This reality has sparked fears in Taiwan about losing its strategic advantage and becoming more vulnerable to external pressure, particularly from China.

Technological Concerns: Will TSMC’s U.S. Facility Compete with Taiwan?

Another source of anxiety in Taiwan is the potential for the Arizona plant to become a direct competitor to Taiwan’s existing chip production capabilities. While TSMC has assured Taiwan that its core operations will remain in the country, there is a concern that over time, the Arizona plant could eventually surpass Taiwan in terms of technological development.

"The risk is that TSMC’s new plant in Arizona might attract more investment and research from the U.S. government, leading to more advanced technologies being developed there rather than in Taiwan. That could weaken Taiwan’s global position," explains a technology analyst.

While TSMC’s Arizona facility will initially focus on producing chips using mature technologies, there are concerns that continued investment in the U.S. could shift the focus toward more cutting-edge semiconductor research and development in Arizona. If this happens, Taiwan may lose its edge as the global leader in the semiconductor sector.

The U.S.-Taiwan Relationship: Strengthening Ties or Weakening Leverage?

On the one hand, TSMC’s move to Arizona is seen as a positive development for U.S.-Taiwan relations, as it strengthens the ties between the two nations and aligns with the U.S.’s push to reduce its dependence on foreign semiconductor suppliers. On the other hand, it also creates a complex dynamic for Taiwan. While Taiwan’s role in the global chip supply chain is indispensable, it must also navigate the fine line of strengthening its ties with the U.S. without upsetting China further.

"For Taiwan, the concern lies in maintaining a balance. TSMC’s investments in the U.S. could solidify Taiwan’s relationship with the U.S., but it could also alienate China, exacerbating an already delicate geopolitical situation," says a former Taiwanese diplomat.

The U.S. and Taiwan share common interests in the semiconductor industry, but Taiwan’s long-term security may be threatened if its dependence on the U.S. increases. The growing interdependence between the U.S. and Taiwan in the semiconductor sector could potentially increase Taiwan's vulnerability in the event of a geopolitical crisis.

The growing concerns in Taiwan about TSMC’s investment in Arizona reflect the complexities of global supply chains, geopolitical pressures, and the country’s delicate position in the world order. While TSMC’s decision to invest in Arizona offers opportunities for diversification and U.S.-Taiwan collaboration, it also raises questions about Taiwan’s future role in the global semiconductor industry, its security, and its relationship with both the U.S. and China.

For Taiwan, the key lies in balancing its strategic interests with its economic and security needs. As TSMC moves forward with its Arizona facility, the island will undoubtedly continue to closely monitor how these developments shape its future, both in the semiconductor sector and in the broader global context.