A New Crossroads in U.S.-Taiwan Semiconductor Relations

AT A GLANCE

• TSMC Potential Intel Takeover: TSMC considers operating Intel’s U.S. factories to boost domestic chip production, responding to Trump’s push.
• Taiwan Responds and Pledges Investment: President Lai vows greater U.S. investment, increased defense spending, and a cooperative “democratic supply chain” vision—countering Trump’s protectionist demands.

TSMC Potential Intel Takeover

Taiwan Semiconductor Manufacturing Company (TSMC), already investing US$65 billion in three Arizona plants, is weighing whether to operate Intel’s U.S. facilities at the request of the Trump administration. Although talks remain in early stages, the goal is clear: reinforce American chip production and address Intel’s weakening market presence.

Despite significant government incentives for Intel, including billions in subsidies, the company has struggled to secure external customers for its newer facilities—particularly in Ohio. By potentially allowing TSMC, the world’s top contract chipmaker, to take over these plants, the Trump team seeks immediate results. This urgency mirrors earlier actions that successfully lured TSMC to establish a foothold in Phoenix. However, such a move also faces political and regulatory hurdles. Trump has repeatedly claimed Taiwan

“took our chip business away,”

and threatens more tariffs or revoked subsidies if manufacturing does not return in earnest.

Taiwan Responds and Pledges Investment

Taiwanese President Lai Ching-te appears determined to maintain a collaborative approach to the U.S. relationship—even under the shadow of Trump’s tariff and protectionist rhetoric. “We will increase investment in the US and purchases from it to balance bilateral trade,” Lai said, acknowledging Washington’s concerns over the widening trade deficit.

More than just an economic promise, Lai has also pledged to raise Taiwan’s defense spending to over 3% of GDP, signaling deeper military and strategic alignment with the U.S. However, Lai draws a clear line on Taiwan’s autonomy and its leading semiconductor role.

“I want to emphasise that as the world’s most potent semiconductor [manufacturing] power, Taiwan is capable and willing to respond to new situations,”

he stated, pushing back against accusations of “stealing" U.S. chip business. Instead, he envisions a “global semiconductor democratic supply chain initiative,” a framework that positions Taiwan as an indispensable partner rather than merely a target of American demands.

A senior Taiwanese national security official clarified that while Taipei supports further U.S. investments by TSMC, it must ensure national security is not compromised.

“If TSMC, after evaluation, finds that . . . it helps them globalise, then of course we will help discuss this with the US side to negotiate the best possible result,” he said. “Our high-tech industry, and specifically TSMC, are very important to our national security.”

Trump, however, is adamant about reshoring chip manufacturing on a larger scale.

“We want that business back in the US,” he declared. “… and if they don’t bring it back, we’re not going to be very happy.”

Now that the U.S. has a new president whose administration wields economic policy as a political weapon, friction between Trump’s protectionist legacy and Taipei’s strategic semiconductor edge persists. With Taipei holding a 6.4% TSMC stake, the AI Chip Act’s unintended impacts reveal that a purely domestic approach may no longer suffice. A more collaborative, commerce-driven strategy is critical to safeguarding U.S. supply chains and preserving Taiwan’s global standing in advanced chipmaking.