# Taiwan hails ‘historic’ TSMC deal with US, but will it lose the ‘silicon shield’ protecting it from China?

TSMC’s chief executive, CC Wei, smiled broadly as he stood next to Donald Trump in the White House on Monday, announcing what he said was the biggest foreign direct investment on US soil in history. His company – the producer of most of the world’s most advanced semiconductors – .

For TSMC the deal meant they would avoid massive tariffs Trump had flagged for the global chip industry. For the US it meant tens of thousands of construction jobs, and the eventual development of crucial technology on US soil, far away from the threat of China taking control of it if it one day annexed .

The deal is not set in stone. Under Taiwanese law TSMC is required to have government approval for any foreign investment over $1.5bn – a fraction of this deal’s size. President Lai Ching-te said the government would review the deal with “national interests” in mind. The economic affairs ministry told the Guardian on Wednesday it hadn’t received an application yet.



The deal has rung alarm bells. Members of the opposition KMT have said it could weaken Taiwan’s security.

“.” said the KMT legislator Ko Ju-Chun.

Taiwan’s chip industry – of which TSMC is the largest and most advanced member – contributes up to 15% of Taiwan’s GDP. It is also seen by many as Taiwan’s “silicon shield”, a significant piece of leverage to incentivise the world to help keep it – and the globally crucial chip supply – out of Chinese hands. As Donald Trump has signalled a diminished personal interest in defending Taiwan, such leverage has grown more important.

Lai’s office has said it will ensure that TSMC “will keep its most advanced manufacturing processes in Taiwan”, but that statement that appeared at odds with what was said by Wei and Trump at the White House. Wei reportedly said the deal meant TSMC would be “producing the most advanced chip on US soil”, while Trump declared “the most powerful AI chips in the world will be made right here in America”.

When asked by the Guardian to define the “most advanced tech” that the government was pledging to keep onshore, given that TSMC’s most advanced product – its two-nanometer chips – are already scheduled for US production, the economic affairs ministry appeared to suggest it was human talent. It described Taiwan’s lauded Stem training-to-employment pipeline that underpins the local chip industry’s success.

“This is highly dependent on Taiwan’s high-quality semiconductor talents, an advantage that is difficult for other countries to replicate,” the ministry said.

Kwei-bo Huang, professor of diplomacy at Taiwan’s National Cheng Chi university, said the Lai administration needs to heed to people’s “rising worry” about the weakening silicon shield.

Amid growing local pressure for answers, President Lai and Wei held a press conference on Thursday. Wei told the reporters he’d had a “stressful” few days meeting two presidents, and suggested that Lai had ordered him to face the press because they “must explain this to the public”.

Lai declared the deal was a “historic moment” in US-Taiwan relations. He and Wei provided assurances that the investment would not dilute or hinder the domestic business of TSMC. Both insisted that there was no political pressure from the US, that it was due simply to increased customer demand from the US. They did not mention tariffs or answer concerns about the security of the silicon shield.

Huang said it was “reasonable and honest” for Wei to say the expansion was driven by customer demand. Tariffs and restrictions on  buying critical chips means TSMC’s revenue now overwhelmingly comes from the US.

“.” he said.

“The Lai administration should be clear to the Taiwan public both about the potential economic and psychological effect TSMC’s recent decision will cause.”
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