United States President Donald Trump has allegedly warned Taiwan Semiconductor Manufacturing Company (TSMC) of a potential 100% tax if it did not establish its plants in the US.

Speaking at a Republican National Congressional Committee event, Trump criticized the Biden administration for providing US$6.6 billion to TSMC’s US unit.

He said that semiconductor companies do not need such financial support.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ Taiwan’s semiconductor dominance resulted from four decades of strategic industrial policy

Taiwan’s world-leading semiconductor position didn’t happen overnight but emerged from deliberate government policies dating back to the 1970s.

The foundation was laid with the RCA Project in the mid-1970s when Chiang Ching-Kuo initiated technology transfer programs through the Industrial Technology Research Institute (ITRI), focusing on practical manufacturing capabilities rather than just research 1.

This early investment led to the creation of United Microelectronics Corporation (UMC) in 1980, followed by the establishment of the Hsinchu Science Park in 1979, which attracted foreign investment and returning Taiwanese talent 1.

The results are remarkable: Taiwanese companies now hold 68% of the global market in foundry services, with TSMC alone capturing 55% market share 12.

This historical context helps explain why rebuilding domestic semiconductor manufacturing capacity in the U.S. requires significant government intervention through programs like the CHIPS Act, as the U.S. share of global semiconductor manufacturing fell from 37% in 1990 to just 10% in 2022 3.

2️⃣ U.S.-Taiwan semiconductor interdependence creates complex economic realities

Trump’s tariff threat reflects a simplified view of a deeply interconnected supply chain where punitive measures could have far-reaching consequences for both economies.

The U.S.-Taiwan semiconductor relationship has developed over three decades, with Taiwan’s industry now crucial for U.S. tech giants like Apple and Nvidia that design but don’t manufacture chips 4.

This interdependence is quantifiable: 23,100 U.S. companies source directly from Taiwanese suppliers, and experts estimate that losing access to Taiwan’s chip production could result in a 5-10% hit to U.S. GDP 4.

Taiwan accounts for 63% of global manufacturing capacity at advanced nodes below 10nm, which are critical for cutting-edge applications in artificial intelligence and advanced computing 5.

Recent Taiwan Semiconductor Manufacturing Company developments