Taiwan Leans on Chip Diplomacy Amid Pressure to Expand Production Abroad

At last week’s SEMICON Taiwan trade show, the island promoted itself as a democratic and dependable semiconductor supplier for the global AI boom, while signaling openness to sharing its chip advantages with allied nations. Home to major chipmaker TSMC, Taiwan has long used its technology strength to build international support, a strategy Beijing regularly pushes back against by insisting the island is part of its territory.

Washington Pushes for More Local Manufacturing

Pressure from the United States, Taiwan’s key security partner, continues to grow as Washington seeks more chip production on American soil. TSMC has already committed $265 billion toward Arizona facilities. President Lai Ching-te told the event that Taiwanese firms expanding globally would “create shared prosperity” rooted in democratic values, while Economy Minister Kung Ming-hsin revealed plans for an additional $20 billion in U.S. investment.

Tariff Deal Faces Uncertainty

Taiwan earlier reached an agreement with Washington to boost U.S. investment in exchange for lower export tariffs, though officials from the Commerce Department have warned that tariffs remain on the table for companies not manufacturing domestically. Despite this, a senior U.S. trade official described the partnership as productive and mutually beneficial.

Industry Leaders Back Global Expansion

Foxconn chairman Young Liu said companies must now build “with Taiwan” in the markets they serve rather than solely on the island, a view echoed by ASE’s chief operating officer, who called the shift politically necessary. Meanwhile, the European Union is also courting Taiwanese investment through its Chips Act 2.0, with officials citing shared democratic values and mutual disputes with China as grounds for closer cooperation.