Recently, remarks by US officials have drawn attention in Taiwan for linking security assurances to levels of investment and the relocation of semiconductor production capacity. Such language might be unsurprising in an era increasingly shaped by transactional diplomacy, but from the perspective of political economy and industrial policy, it signals a consequential shift.
Traditionally, security cooperation has rested on shared strategic interests, institutional alliances and long-term commitments. Even when industrial cooperation was involved, these arrangements were usually framed as complementary measures rather than explicit preconditions for security support. However, when security assurances are articulated in conditional terms, they begin to resemble negotiated outcomes rather than stable institutional commitments.
For Taiwan, the risks of such conditionality are not confined to diplomacy alone. They extend into how it is perceived by others. A security relationship framed as contingent on meeting specific industrial demands risks recasting Taiwan from an indispensable strategic partner into a supplier required to continually “pay” for protection.
The issue becomes particularly salient when security language is paired with explicit targets for industrial relocation. Proposals to shift a significant share of semiconductor production capacity overseas might be defended on grounds of risk management from the standpoint of individual firms. Yet, when such targets are embedded within broader policy frameworks — alongside tariffs, subsidies, regulatory incentives and security discourse — they amount to a form of structural reconfiguration rather than a series of isolated business decisions.
Semiconductor competitiveness does not derive solely from individual fabrication plants. It is rooted in dense ecosystems of research and development, highly mobile engineering talent, tightly coordinated supply chains and long-term cumulative learning. Once these ecosystems are fragmented, their loss cannot be fully compensated through single-point investments elsewhere. The costs are often invisible in the short term, but they manifest over time through reduced innovation efficiency, weaker integration and diminished strategic flexibility.
Advocates of large-scale overseas investment often argue that such moves would help Taiwan avoid excessive industrial concentration, and address domestic challenges such as wage stagnation and weak internal demand. The question is not whether risks should be diversified, but whether decisionmaking authority and technological accumulation are being transferred along with production capacity. When core decisions gradually shift beyond Taiwan’s control, the ability to steer future industrial upgrading is inevitably weakened.
The conditional framing of security commitments also raises concerns about institutional trust. Sustainable national development strategies cannot rest on arrangements that weaken confidence in the stability of core partnerships. In democratic societies, security and economic cooperation require not only strategic alignment, but also a shared understanding that commitments are not subject to continual renegotiation based on short-term political preferences.
Taiwan cannot remain detached from global supply chain realignments. The challenge lies in distinguishing between necessary adaptation and structural concessions that undermine long-term autonomy. Thus, the most pressing question is not how much Taiwan invests or what percentage of capacity is relocated, but how much policy space and industrial decisionmaking authority Taiwan retains amid shifting security architectures.
Leonard Fong-sheng Wang is an honorary chair professor at the National University of Kaohsiung and vice president of the Asia-Pacific Research Foundation.
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