The rumor that the U.S. government is allegedly pushing a joint venture between Intel and TSMC has sparked an outcry in Taiwan about the chance of the country losing its 'Silicon Shield,' a theory that TSMC's crucial role in global chip manufacturing would prevent China from invading, or spur other countries to rush to its aid in the event of war. Naturally, the rumored partnership would impact TSMC’s strategy and Taiwan's politics. With such a JV, Taiwan would no longer be the world’s key supplier of advanced processors.
"'Media reports' gone wild," wrote Dan Nystedt, vice president at TriOrient, an Asia-based private investment company, in an X post. "Headlines from Taiwan [are] from pro-Chinese Communist Party/anti-America media."
Indeed, Taiwanese media treat TSMC and the country as one, warning that TSMC will become partly an American company and Taiwan will lose its ‘Silicon Shield.’ Nystedt pointed out three headlines:
- No.1 foreign analyst warns: be afraid for TSMC! The whole bowl is going to be taken away. [Link]
- Shocking report: The U.S. asks TSMC to save Intel with a joint venture fab, technology transfer: Taiwan is finished! [Link]
- Rivals become teammates? TSMC and Intel are joining forces to become US Semiconductor (USSMC). [Link]
Most stories rebuff the original report and add commentary that the joint venture will not benefit TSMC but instead harm the company and the country. Some even try to drag in unrelated facts as indirect confirmations supporting the joint venture. Earlier this month, TSMC’s board of directors held its first-ever Q1 meeting in the U.S. instead of Taiwan. While business media attributed this to the company’s preparations to formally kick off mass production of advanced processors at Fab 21 in Arizona—a first in TSMC’s history—Taiwanese media claimed that the meeting was tied to Trump’s possible return to the Oval Office.
However, while the media tends to stoke fears in headlines, it also quotes analysts who believe that, given the onshoring trend, TSMC's decision to build production capacity outside Taiwan was inevitable. Nonetheless, even these analysts believe that TSMC may experience unprecedented political pressure in the U.S.
Yang Yingchao, chairman of Kirkland Capital, told China Times News Network that TSMC’s Fab 21 project in Arizona has significant political implications, as setting up a chip production site worth $65 billion in the U.S. is commercially impractical for TSMC. Producing chips in Taiwan is far more cost-effective due to lower expenses and a larger workforce of engineers. Additionally, since chips are small and easy to transport, there is little logistical benefit in manufacturing them in the U.S. However, it has become nearly impossible for TSMC to avoid expanding its production capacity in America now that advanced chip supplies have become a matter of national security and economic prosperity.
Yang Yingchao also doubts the likelihood of the U.S. government imposing a 100% tariff on Taiwan-made chips. He argues that Trump often uses bold threats as leverage in negotiations, citing previous instances where similar tariff threats were eventually dropped. Imposing a 100% tariff on chips would likely increase consumer prices or within the supply chain, ultimately harming the U.S. economy.
However, Yang remains skeptical of TSMC's business media explanations for holding its board meeting in the U.S., suspecting they are influenced by external pressure rather than actual operational needs. This could imply that the Intel and TSMC collaboration story may have some grounds.
