Taiwan Fears Trump Could ‘Steal’ Crown Jewel TSMC

Government seen more helpless than investors

By: Jens Kastner

The Taiwanese are growing increasingly worried that US President Donald Trump is preparing a de facto takeover of their technological crown jewel, Taiwan Semiconductor Manufacturing Company (TSMC), the island’s largest company by far thanks to its commanding position in the global chip supply chain.

At the center of this concern lies TSMC’s relationship with ailing US counterpart Intel, with various proposals emerging, including for TSMC to acquire shares in Intel or form a joint venture. Once America’s premier tech company, Intel, lagging in advanced chip manufacturing technology, faces declining revenue and a drop in net income primarily due to intense competition from companies like AMD and Nvidia, now the world’s most valuable company.

The Taiwanese fear that either alternative would amount to outright plunder of TSMC’s technology and intellectual property as the Taiwanese government would be watching helplessly.

The latter concern is based on the notion that Trump could threaten to withdraw US security guarantees against a Chinese attack as leverage just as he is currently doing with Ukraine in his quest to pocket the war-torn country’s rare earths reserves.

Because of its commanding position in both the American and Chinese tech industry supply chains as the two nations remain at ideological and economic loggerheads, Taiwan has inevitably found itself ensnared in the geopolitical conflict between the two, with the US prohibiting companies using US technology from exporting products to prohibited companies in China. Taiwanese semiconductor companies, while looking nervously at mainland threats, have had to stop supplying major Chinese clients like Huawei.

The Taiwanese saw it coming when Trump, after taking office, repeatedly expressed dissatisfaction with Taiwan "stealing" American chip manufacturing and even threatened to impose a 100 percent tariff on Taiwan chips.

“Taiwan is 9,500 miles away. It’s 68 miles away from China,” he said last July while campaigning for the presidency, adding that Taiwan “took our chip business from us. I mean, how stupid are we?” Thinking aloud further, he said “immensely wealthy” Taiwan should be paying the US for protection. “I don’t think we’re any different from an insurance policy. Why? Why are we doing this?”

After international financial services firm Baird recently said that Asia semiconductor supply chain talks suggest the US government will ask TSMC to send engineers to Intel's 3nm/2nm fab, applying the company's know-how to ensure both the fab and subsequent manufacturing projects from Intel are viable, the Taiwan Institute of Economic Research (TIER) confirmed to local media that the rumors are to be taken seriously.

“If a joint venture with Intel is formed, it will inevitably focus on advanced semiconductor technology and once technology leaks occur, that could jeopardize TSMC's leading edge in advanced technology,” said Liu Pei-chen, a TIER researcher.

“Although TSMC has built production facilities in Dresden, Germany and Kumamoto, Japan through joint ventures, the local businesses it partners with are its customers. A joint venture with Intel is the worse choice for TSMC and more unfavorable than Trump's chip tariff plan.”

TSMC is currently building factories in Arizona, where it reportedly plans to begin mass production of 4-nm chips within the first half of 2025, with US$6.6 billion in subsidies as part of the so-called CHIPS Act. The driving force behind the act was the intensifying geopolitical competition between the U.S. and China, which made the U.S. realize its severe lack of domestic chip manufacturing capabilities.

Taiwan’s own rules restrict Taiwanese chipmakers to overseas production of chips that are at least two generations behind the most advanced semiconductors produced in Taiwan, but Taiwan’s minister of economic affairs JW Kuo on January 10 announced that the government would no longer prevent TSMC from investing in next-generation 2-nm chip production in the US.

The Economist Intelligence Unit (EIU), a UK-based think tank, then wrote that while “We do not see the recent policy moves as suggesting political pressure from the Taiwanese government for TSMC to change its corporate strategy in risky ways, we believe that the incoming Trump administration will employ a ‘carrot and stick’ policy stance vis-à-vis Taiwan that may influence the expansion of the Taiwanese chip sector into overseas markets.”

Taiwan’s opposition Kuomintang (KMT) has long been accusing the ruling Democratic Progressive Party (DPP) of “gifting” TSMC to the US in exchange for protection against China. On February 25, the KMT released a survey showing that 84.8 percent disagreed with allowing TSMC to transfer its advanced 2-nanometer process to the US if Trump makes more pressing demands. 83.8 percent agreed that Taiwan’s semiconductor sector can be regarded as the “economic central mountain range” safeguarding the nation against Chinese military threats.

Eduardo Buisson Loureiro, a Macao-based business lawyer focusing on tech transfers, told Asia Sentinel that a hypothetical merger between TSMC and Intel would not only reshape the industry but also provoke a multitude of challenges and reactions from stakeholders worldwide, including potential opposition from TSMC's shareholders.

“They hold significant power in influencing corporate decisions, especially those involving the transfer of critical technology abroad,” Loureiro said.

“TSMC shareholders have robust legal avenues to leverage specific laws and corporate governance mechanisms to block such initiatives.“

Loureiro went on to explain that specifically, the Taiwan Company Act stipulates that receiving the transfer of another company's whole business or assets would require the approval of shareholders. TSMC shareholders could also invoke the National Security Act by arguing that transferring technology compromises national security. They could also influence the board and management through elections and legal responsibilities, file lawsuits or injunctions to halt or delay the transfer and lobby government agencies.

“By organizing collectively, even minority shareholders can influence the outcome if they hold significant shares,” Loureiro said.

TSMC’s share price was on an upward trajectory for most of last year, but as of Feb 26, it dropped close to 14 percent in a month.