Sat, Oct 04, 2025 page8

• Rethinking TSMC’s future path

  • By Y. Tony Yang
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  A recent poll showing that half of the Taiwanese respondents fear Taiwan Semiconductor Manufacturing Co (TSMC) becoming “US-SMC” reflects a profound anxiety about technological sovereignty that transcends traditional geopolitical frameworks. Yet this binary concern obscures a more nuanced reality about the semiconductor industry’s evolution and Taiwan’s strategic position in an increasingly multipolar technological landscape.

  Taiwan’s worry about TSMC’s Americanization reveals an interesting paradox: The very success that makes TSMC globally indispensable also makes it vulnerable to external pressures.

  With TSMC controlling 64 percent of the global contract chipmaking market and Taiwan producing 63.8 percent of the world’s semiconductors, the nation has achieved unprecedented technological leverage.

  However, this dominance has created what economists call “too big to fail” syndrome, where success becomes a strategic liability.

  The fear of TSMC becoming “US-SMC” fundamentally misunderstands the nature of modern semiconductor manufacturing. Despite its Arizona expansion reaching full capacity utilization and plans for six additional fabs from a US$165 billion investment, TSMC’s core technological DNA remains irreversibly Taiwanese.

  The company’s most advanced N2 node research, critical intellectual property development and top engineering talent continue to reside in Taiwan. What Taiwan is witnessing is not corporate emigration, but technological diplomacy.

  Rather than viewing TSMC’s global expansion through the lens of zero-sum national competition, Taiwan should embrace what could be termed “distributed excellence” — a strategy that leverages geographical diversification to enhance rather than diminish Taiwan’s technological centrality. The Arizona operations, producing chips for Apple, AMD, Qualcomm, Broadcom and Nvidia, represent TSMC’s response to commercial realities rather than political pressures. US tech giants account for the majority of TSMC’s revenue, making US manufacturing logical and inevitable.

  This expansion strengthens Taiwan’s position in three main ways. First, it reduces the geopolitical risk premium associated with Taiwan-only production, making TSMC a more stable partner for global customers.

  Second, it creates institutional interdependence that makes any disruption to Taiwan’s operations catastrophic for the US.

  Third, it positions Taiwan as an innovation hub of a global network rather than a vulnerable single point of failure.

  Yin Nai-ping (殷乃平), a professor of finance at National Chengchi University, correctly identifies TSMC as Taiwan’s key geopolitical asset, but incorrectly frames its value in terms of exclusivity.

  Taiwan’s strategic importance comes not from monopolizing TSMC’s production, but from controlling its technological evolution. As long as Taiwan remains the epicenter of semiconductor innovation — developing next-generation processes, training elite engineers, and housing advanced research and development — the nation would maintain its indispensable role regardless of where manufacturing occurs.

  Consider the parallel with Switzerland’s pharmaceutical industry: Swiss companies manufacture globally, yet Switzerland remains the undisputed center of pharmaceutical innovation because it controls the intellectual capital. Taiwan can adopt a similar model, evolving from a manufacturing fortress to an innovation empire.

  Taiwan’s semiconductor success story was built on globalization, not isolation. TSMC’s founders understood that serving global markets required global thinking. Today’s expansion into Arizona, with additional facilities planned for Europe and potentially other regions, represents the natural evolution of this philosophy. The alternative — maintaining Taiwan-only production amid rising geopolitical tensions — would be strategically suicidal.

  The real threat to Taiwan’s semiconductor industry is not TSMC’s international expansion, but the nation’s potential insularity. Countries across the world are investing hundreds of billions of US dollars in semiconductor capabilities: the US CHIPS Act has catalyzed US$450 billion in private investment, Europe has committed more than US$103 billion, and South Korea plans US$470 billion through 2047.

  In this environment, Taiwan’s choice is clear: Lead the globalization of semiconductor manufacturing or watch others build alternatives.

  Taiwan should reframe the TSMC expansion narrative from defensive anxiety to offensive opportunity. Instead of fearing the creation of a “US-SMC,” Taiwan should champion the emergence of “Global-SMC” — a distributed network of facilities united by Taiwanese technological leadership and innovation. This requires shifting from a manufacturing-centric to an innovation-centric identity.

  The Arizona fabs would likely face the same challenges that have historically favored Taiwan: complex supply chains, skilled workforce requirements and the iterative learning that comes from concentrated expertise. These advantages cannot be easily replicated, giving Taiwan time to evolve its competitive position.

  Rather than competing on manufacturing scale, Taiwan can compete on technological sophistication, advanced packaging and next-generation process development.

  The poll results reflect a natural, but ultimately counterproductive impulse to preserve “status quo” advantages. True strategic thinking requires embracing change to maintain leadership.

  Taiwan’s semiconductor industry succeeded by being globally minded, technologically ambitious and commercially pragmatic. These same principles, not nostalgic protectionism, would ensure its dominance going into the future.

  TSMC’s global expansion represents not the dilution of Taiwan’s technological power, but its multiplication across continents. The question is whether Taiwan would lead this transformation or be left behind by it.

  Y. Tony Yang is an endowed professor and associate dean at George Washington University.
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