Taiwan Uses Chip Prowess to Court Allies Amid US, EU Investment Demands
Taiwan leveraged its semiconductor industry at SEMICON to strengthen alliances, even as the US and EU push for more Taiwanese chip investment overseas.
At last week's SEMICON Taiwan trade show, the island deployed its most valuable diplomatic asset—its semiconductor industry—to reinforce its position as a dependable, democratic partner in the global AI supply chain.
President Lai Ching-te addressed two separate events at the expo, a rare occurrence, framing the overseas expansion of Taiwanese firms as a way to "let resilience create shared prosperity." He attributed the island's chip strength to its democratic governance and adherence to the rule of law.
Taiwan's diplomatic overtures come amid significant external pressure. The United States, Taiwan's primary international backer, is urging companies to move more advanced manufacturing to American soil. This push is exemplified by TSMC's massive $265 billion investment in Arizona factories. Economy Minister Kung Ming-hsin announced at the opening of the US pavilion that Taiwanese companies plan an additional $20 billion in US investment.
The pressure is not without its leverage. Washington and Taipei reached a deal earlier this year linking increased US investment to reduced export tariffs. However, US Commerce Secretary Howard Lutnick recently warned that tariffs would be imposed on companies that do not manufacture chips in the US. Despite this, Bill Frauenhofer, the Commerce Department official managing the tariff agreement, struck a positive note, calling the partnership "phenomenal" and noting the vested interests both sides have in its success.
Industry leaders acknowledge the shifting landscape. Foxconn Chairman Young Liu stated that companies must now consider how to "make with Taiwan, not in Taiwan," suggesting production should follow markets. Tien Wu, COO of chip packaging giant ASE, agreed, noting that while it is "politically the right thing," there is little choice but to comply.
Taiwan is also courting the European Union, which is seeking greater Taiwanese investment under its Chips Act 2.0. The island sees common ground with the bloc in their shared support for Ukraine and their respective trade and diplomatic disputes with China. Deputy Foreign Minister Francois Wu, speaking at the French pavilion, highlighted shared values of democracy and a rules-based order, stating, "We use technology to connect with the world, not to control it."