How does TSMC manage the Trump shock?
When the board of Taiwan Semiconductor Manufacturing Company (TSMC) scheduled its first ever board meeting in the United States this week, next to the giant plant it is building in Phoenix, Arizona, it thought it could only earn credit from the U.S. government.
It did not imagine the shock of Donald Trump. “In the very near future, we are going to be placing tariffs on foreign production of computer chips, to return production of these essential goods to the U.S.” he told House Republicans on January 27. “They left us and they went to Taiwan.”
Tariffs is shock number one. Number two: “we do not want to give them billions of dollars like this ridiculous programme that Biden has,” he said.
This is the Chips Act signed by President Joe Biden in August 2022, with the aim to increase chip manufacturing in the U.S., just as Trump wants to do. TSMC is receiving US$6.6 billion in grants and US$5 billion in loans for its Phoenix facility. It will involve a final investment of US$65 billion in three plants. It is the largest new foreign manufacturing project in U.S. history.
But even such an enormous investment is not enough for Trump. He has said that TSMC “stole” the business from the U.S. He has no facts to support this claim. Howard Lutnick, Trump’s Commerce Secretary, said at his nomination hearing in January: “TSMC had leveraged the U.S. to take chip manufacturing. We are too reliant on Taiwan. We need to have production in the U.S.”
What should the TSMC board do? It is the world’s largest contract chipmaker and reported a 33.9 per cent increase in annual revenue for 2024, totalling NT$2.9 trillion ($87.8 billion). This was largely due to surging demand for artificial intelligence (AI) chips, which have become a cornerstone of the company's success and significantly exceeded initial projections.
The strong AI momentum has more than doubled TSMC's sales since 2020, solidifying its position as a critical supplier in the semiconductor ecosystem. Its stock has mirrored its operational success, soaring 81 per cent over the past year and far outpacing the broader market's 28.5 per cent gain.
TSMC is not only Taiwan’s richest company. It is also essential to the island’s security. Chips are the trump card of its diplomats around the world. The U.S. and its allies do not want its formidable production capacity to fall under the control of China. This is a very important reason to defend Taiwan against a Chinese attack.
To deal with this threat, the TSMC had adopted a double strategy. In February 2024, it held an opening ceremony for a large factory in Kumamoto, Japan, with the Japanese Prime Minister and Minister of Economy, Trade and Industry in attendance.
In August 2024, it held an opening ceremony for a similar fab in Dresden, Germany. In attendance were the German Chancellor and President of the European Commission. The Phoenix plant is its other giant overseas investment.
At the same time, it insists that Taiwan remains its headquarters and most important production base, making its most advanced chips. No supply chain can match the one it has in Taiwan. And it must be sensitive to the needs of its host government, which does not want a migration of its most important sector.
In the Sino-US trade war, TSMC has clearly aligned with the U.S., which accounted for 70 per cent of its sales in 2024, against 12 per cent in China in 2023.
People in the chip industry say that TSMC cannot move its R & D centre to the U.S. This centre has been one of the keys to its success, with engineers maintaining close contact with the production floor.
One option would be to build a new facility in a “rust-belt” state like Ohio, home state of Vice President JD Vance, said Sasha Chhabra, an international analyst writing in Taiwan’s Commonwealth magazine on February 11. “Trump is looking for something he can sell as a win.”
In a statement after its board meeting in Phoenix on February 12, the TSMC board said that it had approved capital appropriations of about US$17.141 billion in advanced technology capacity, advanced packaging, mature and/or specialty technology capacity and fab construction. It did not say where the money would be spent.
Chhabra said that Taiwan should commit to purchasing US$20 billion in U.S. arms and appeal directly to the American people. “It must dedicate serious resources as part of its national security strategy. Only by winning the hearts and minds of Americans can Taiwan ensure its security is guaranteed beyond vicissitudes of the American presidency,” he said.
TSMC thought it had done enough to show its love for the U.S. Now it must do more.
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