Taiwan leans on chip diplomacy as the US pushes for more factories on American soil

Taiwan went to SEMICON Taiwan last week with a clear message: its chip industry is not just a business success, but a political asset. President Lai Ching-te spoke at two separate events on the same day, saying Taiwanese companies were spreading overseas to “let resilience create shared prosperity” and arguing that the island’s chip strength rests on democracy and rule of law.

That pitch lands in a tricky place. Taiwan’s semiconductor base, led by TSMC, is central to AI hardware, yet the island is under pressure from its most important backer, the United States, to move more production there. TSMC is already investing $265 billion in factories in Arizona, and Taiwan’s economy minister said companies were planning another $20 billion of investment in the U.S.

The incentives are shifting too. Taiwan reached a deal with Washington earlier this year to increase investment in the U.S. in return for lower export tariffs, but the tariff picture is still unsettled. Howard Lutnick, the U.S. commerce secretary, told CNBC that semiconductor tariffs were coming for companies that do not make chips in the U.S.

Even so, the tone at SEMICON was less defensive than you might expect. Bill Frauenhofer, the Commerce Department official handling the tariff agreement with Taiwan, called the partnership “phenomenal” and said both sides had a stake in making it work. Taiwanese executives were blunt about the direction of travel. Foxconn chair Young Liu said companies now had to think about making “with Taiwan,” not just in Taiwan, and ASE chief operating officer Tien Wu said, “Politically it is the right thing,” adding that there was no choice not to do it.

And Taiwan is not stopping with the U.S. It is also trying to pull in the European Union, which wants more Taiwanese investment of its own. The bloc sent European Commission official Kilian Gross to the show to sell its Chips Act 2.0 directly to Taiwanese officials and companies.