The Taiwanese government has defended a landmark trade agreement with the United States against concerns it could hollow out the island's tech sector, even as its crown-jewel chipmaker, Taiwan Semiconductor Manufacturing Co. (TSMC), aggressively expands its manufacturing footprint in the U.S. Under the sweeping new deal struck this week, Taiwanese firms have pledged at least $250 billion in direct investment to expand U.S. semiconductor, energy, and artificial-intelligence manufacturing, with TSMC leading the charge.
Vice Premier Cheng Li-chiun pushed back against claims of industrial relocation, stating, "This is not an industrial relocation, but instead an extension and expansion of Taiwan’s technology industry." The U.S.-Taiwan agreement caps tariffs on Taiwanese goods at 15%, down from 20%, in return for $500 billion in finance or investment from Taiwan, including its chipmakers. U.S. Commerce Secretary Howard Lutnick stated the deal aims to bring 40% of Taiwan’s semiconductor supply chain to American soil.
Concurrently, TSMC is rapidly executing its U.S. expansion. The company has completed the purchase of an additional 900 acres in Arizona after outgrowing its initial 1,100-acre site. TSMC forecasts its capital expenditures will increase more than 30% in the new year to meet AI chip demand. The company has now committed $165 billion to its U.S. operations, including a previously announced $100 billion pledge.
TSMC's first Arizona fabrication plant began volume production in Q4 2024 using 4-nanometer technology, with yields matching its Taiwan facilities. The second fab, construction complete, will use 3nm technology with volume production expected in the second half of 2027. A third fab, which broke ground in April 2025, will produce 2nm chips by the end of the decade. TSMC is also applying for permits for a fourth fab and its first U.S. advanced packaging plant.
Despite the overseas push, Taiwanese officials and TSMC executives insist the island will retain its technological lead. Economics Minister Kung Ming-hsin projected that by 2030, Taiwan will hold roughly 85% of the capacity for advanced chips at 5 nanometers or below, with the U.S. at about 15%. By 2036, he expects Taiwan's share to be about 80%. TSMC CFO Wendell Huang emphasized that leading-edge technologies will be developed and stabilized in Taiwan first for practical reasons before being transferred overseas.
