Tensions Are Rising Between the U.S. and Taiwan. The Chip Industry Is at the Center of the Conflict

President Donald Trump is determined to restore U.S. leadership in semiconductor manufacturing. Currently, Asia produces 90% of memory chips, 75% of microprocessors, and 80% of silicon wafers. Taiwan leads the industry, producing 90% of highly integrated chips and 41% of microprocessors.

The Trump administration is taking steps to encourage U.S. companies to buy domestically made integrated circuits. Tariffs play a key role in this strategy, and Taiwanese chipmakers aren’t exempt, despite the geopolitical alignment between the U.S. and Taiwan. Trump made his intentions clear in late January:

“In the near future, we will be placing tariffs on foreign production of computer chips, semiconductors and pharmaceuticals to return production of these goods to the United States. They left us and went to Taiwan, which is about 90% of the chip business, and we want them to come back. We don’t want to give them billions of dollars like this ridiculous program Biden has. They already have billions. They have nothing but money. They need an incentive. We put a 50% tariff, 75%, even 100%, and now they are thriving.”

Taiwanese Government Sets Limits for TSMC

Trump’s mention of Taiwan clearly refers to TSMC. Other semiconductor manufacturers on the island, such as UMC, play a role in the chip market, but their influence is far smaller. TSMC dominates the integrated circuit market with about a 60% share, cementing its leadership in chip manufacturing.

TSMC has been preparing for this situation. For more than four years, the company has been expanding its semiconductor manufacturing infrastructure beyond Taiwan’s borders for two reasons. First, overseas expansion safeguards its business in case of a war between China and Taiwan that could disrupt its island facilities.

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Second, TSMC is significantly increasing its presence in the U.S. Its new factories in Arizona aim to protect the company from both geopolitical conflict and U.S. tariffs. That’s not all. According to The Wall Street Journal, TSMC is preparing a bid to acquire Intel’s integrated circuit manufacturing plants, though there has been no official confirmation.

If successful, this move would allow TSMC to consolidate its U.S. semiconductor infrastructure and establish operations in countries where it currently lacks facilities. However, the Taiwanese government doesn’t support this possibility. Taiwan’s economy depends heavily on its chip industry—especially TSMC—so U.S. ambitions to reclaim leadership in this sector directly threaten the island’s economic stability.

Taiwan Economy Minister Kuo Jyh-huei has warned TSMC: “No one can shake the foundations of Taiwan’s semiconductor industry. We have to have confidence in TSMC, and the government will fully support the ‘sacred mountain protecting the country.’ For TSMC to go into the world and have a joint venture in any location, it definitely needs government permission.”

TSMC’s expansion outside Taiwan could weaken the island’s dominance in an industry that sustains it. While it remains uncertain whether TSMC will acquire Intel’s factories, one thing is clear: 2025 will be a pivotal year for the evolution of the integrated circuit industry.

Image | TSMC

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