Taiwanese government avoids trouble with Trump

With a U-turn in its semiconductor policy, Taiwan is trying to avoid possible retaliation from US President-elect Donald Trump. Taiwan's Minister of Economic Affairs J.W. Kuo is now leaving it up to chip contract manufacturer TSMC to decide whether it wants to use its latest manufacturing process in its overseas plants. However, this will not change the chip production in TSMC's US plants in Arizona in the short term.

In November 2024, Taiwan's Minister of Economic Affairs J.W. Kuo emphasized that the chip contract manufacturer TSMC may only use its state-of-the-art manufacturing processes in Taiwan itself. Now Kuo says: “Those were rules of the old days. Times have changed. […] Private companies should make their own business decisions based on their own technological advancement.”

The Taiwanese government is interfering in the semiconductor industry because the country is protecting itself from China with a “silicon shield”. The Chinese Communist Party repeatedly emphasizes its desire to incorporate Taiwan as part of its one-China policy. However, because Taiwan also manufactures the most modern semiconductor chips for the West and cooperates in trade restrictions against China, the USA in particular has an interest in Taiwan's independence. The country has therefore been under the protection of the US military to date. TSMC has been built up as the global market leader for decades, partly with the help of subsidies.

2 nanometers now approved for the USA

In the current discussion, the focus is initially on the 2-nanometer production generation. Series production with these structures will start in Taiwan in the course of this year. Officially, TSMC should also produce such chips directly in the USA, for example for Apple and Nvidia.

Taiwan is thus signaling that there are no restrictions and TSMC can do everything possible to manufacture modern 2 nm chips in the USA.

However, due to previous regulations, TSMC's first US plant is initially designed for production with 4-nanometer technology – actually an optimized process of the 5-nm class; the names in chip production are smoke and mirrors. Series production in Arizona is due to start later this year. In Taiwan, on the other hand, chips from the genuine new 3 nm generation have long been rolling off the production line.

No longer cutting-edge at the earliest possible start of production

The 4 nm semiconductor plant in Arizona has just been completed. It would be economically questionable to switch production directly to 2 nm with partly new machines. A second fab is currently under construction and is planned for 2 nm chips anyway. As it will take years to build and start production, series production cannot begin there until 2028. An earlier 2 nm start is hardly possible.

In 2028, TSMC wants to be producing semiconductors with the A16 production technology, the 2 nm successor, by then. The successor A14 may already be ready for production there. As soon as 2 nm production is ready in the USA, it will therefore no longer be cutting-edge. This is why the change in semiconductor policy will have no impact in the near future.

Kuo does not say a word about A16 or A14. Meanwhile, the rules could look different again in 2028/2029. Kuo himself hints at the political calculation: “Trump will only be in office for four years and cannot run for another term, so his influence will be limited.”

(mma)