Hsinchu, Taiwan – APRIL 16: Entrance to the factory of Taiwan Semiconductor Manufacturing Company (TSMC), a Taiwanese multinational semiconductor manufacturing and design company, on April 16, 2025 in Hsinchu, Taiwan.
Daniel Tseng | Anadolu Getty Images
A U.S.-Taiwan deal aimed at expanding chip production in the U.S. is unlikely to completely deprive Washington of the island’s most advanced semiconductors any time soon, several analysts told CNBC, but the so-called “silicon shield” will not be maintained for now.
Taiwan dominates global chip manufacturing, produced by the Taiwan Semiconductor Manufacturing Company. most advanced chips in the world. It accounts for about a third of global demand for new computing power evaluated Must be made in Taiwan.
The island’s central role in the global semiconductor supply chain has made maintaining its virtual autonomy and fending off any Chinese incursion a strategic priority for the US and its allies, an idea known as the Silicon Shield. Beijing claims to have taken territorial control over the democratically-ruled island.
As part of the trade deal struck on Thursday, the Taiwanese government promised Guarantees $250 billion Taiwanese companies also enjoy loans to chip and technology companies to expand their manufacturing capacity in the US higher quotas for duty-free imports sent their chips to the US
In return, Washington will reduce tariffs on many goods from Taiwan to 15% from 20% and waive tariffs on generic drugs and ingredients, aircraft components and natural resources unavailable domestically.
The goal is to bring 40% of Taiwan’s semiconductor supply chain to the US, Trade Secretary Howard Lutnick told CNBC on Thursday. But experts doubt the plan will be easy, given Taipei’s strict stance on keeping cutting-edge technology at home.
Taiwan’s “silicon shield” will remain strong until the end of the decade, with the world’s most important advanced power concentrated on the island, SemiAnalysis analyst Sravan Kundojjal said.
Taiwanese authorities have placed TSMC’s overseas factories at least two generations behind domestic production, known as the N-2 rule.
The semiconductor ecosystem cannot be replaced overnight, so the silicon shield may weaken, but it is still there in the near future.
Dennis Lu-Chun Weng
Associate Professor of Political Science at Sam Houston State University
While TSMC manufactures its most advanced chips in-house using 2-nanometer technology, or nodes, its Arizona plant only recently began producing more advanced 4-nanometer chips for US customers. plans to increase By 2030, up to 2 nanometer and A16 nodes.
In semiconductor manufacturing, smaller nanometer sizes mean denser transistors that increase processing speed and improve energy efficiency.
This four- to five-year delay will ensure that Taiwan retains its advantage, Kundojala said, adding that “if Taiwan were invaded tomorrow, the global economy would face a depression-level event.”
A spokesman for China’s Foreign Ministry said at a press conference on Friday that Beijing “firmly opposes any agreements signed between Taiwan and countries that have diplomatic relations with China” and called on the US to adhere to the “one China principle”.
Wendell Huang, TSMC’s chief financial officer, told CNBC on Thursday that the company will do just that continue to develop its cutting-edge technologies in Taiwan depend on the need for “very intensive collaboration” between domestic research teams and manufacturing operations.
“We will be sending hundreds of engineers to (between) different sites in Taiwan. So, when we introduce the most advanced technology, it will stay in Taiwan,” Huang said.
However, the world’s largest contract chipmaker has pledged to invest $165 billion in US chip manufacturing and processing facilities, as well as a research lab that supplies customers such as Nvidia and Apple.
Wu Cheng-wen, head of Taiwan’s National Science and Technology Council, said Financial Times last year It was crucial for Taiwan to keep its cutting-edge research and development at home and ensure that domestic industry was not a “sink”.
“If we move our R&D overseas, it will be dangerous for us,” Wu said in an interview.
US land barriers
Analysts say it will be difficult to shift chip production away from Taiwan.
Taiwan’s pipeline of engineering talent and manufacturing capabilities in the semiconductor supply chain, particularly in advanced manufacturing, “are not duplicated at scale anywhere else,” said William Reinsch, senior adviser at the Center for Strategic and International Studies.
A lack of trained workers and higher manufacturing costs have delayed the opening of TSMC’s U.S. factories, Reinsch said, adding that the new trade deal will do little to address those constraints. It will take longer than expected to fulfill the promised investment commitments and is unlikely to reach the promised level.
“The semiconductor ecosystem can’t be replaced overnight, so the silicon shield may be weakened, but it’s still there in the near term,” said Dennis Lu-Chung Weng, associate professor of political science at Sam Houston State University.
“What will happen after Trump is a big question: if future US administrations continue with large-scale migration, it will become a question of ‘when’ Taiwan will lose its special privilege,” Weng warned.
Taiwan officials have stressed the need to diversify its economic model, encourage more industrial growth and strengthen its defense capabilities to counter China’s military pressure.
A Chinese invasion of Taiwan remains a low-probability event, and a trade deal is unlikely to change Beijing’s calculus, said Ava Shen, a Taiwan and China foreign policy expert at the Eurasia Group. According to Shen, mainland authorities are paying more attention to the military balance against the US and the level of American defense support to Taipei.