At SEMICON Taiwan last week, the island cast its semiconductor industry as a democratic and reliable supplier for the AI era and signalled that it will spread manufacturing to friendly economies. The pitch reframes Taiwan's “silicon shield” as a shared asset, and it lands as Washington pushes for more chips made on American soil, Europe courts Taiwanese investment and governments everywhere race to bring chip production closer to home.

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At SEMICON Taiwan, the island's largest annual gathering of the chip industry, Taiwan cast itself as a dependable, democratic supplier for the AI boom and offered to share the technology with countries that share its politics. President Lai Ching-te told the crowd that Taiwanese firms were expanding abroad to “let resilience create shared prosperity”, and that the island's lead in semiconductors rests on democracy and the rule of law. Home to TSMC, whose chips run most of the world's advanced AI, Taiwan has long used its technological weight to win friends in a world where formal diplomatic recognition is scarce.

Washington, Taiwan's principal arms supplier and security backer, wants more of that manufacturing on American ground, and TSMC is already sinking roughly $165 billion into fabs in Arizona. Economy Minister Kung Ming-hsin, opening the US pavilion at the show, said Taiwanese companies planned another $20 billion of investment in the country. Earlier this year Taiwan agreed to raise its US investment in return for lower export tariffs, though the terms remain unsettled. Commerce Secretary Howard Lutnick told CNBC last week that semiconductor tariffs were coming for firms that do not build in the United States.

Bill Frauenhofer, the Commerce Department official managing the tariff arrangement with Taiwan, kept the mood warm at SEMICON. “The phenomenal partnership” between Taiwan and the U.S. was working, he said. “And we really, both of us, have vested interests in terms of making this successful.”

Make with Taiwan, Not in Taiwan

Young Liu, Chairman of Foxconn and the largest maker of Nvidia's AI servers, told a panel that companies now had to “think about how to make with Taiwan, not in Taiwan; make with Taiwan in the country where the market is”. Tien Wu, Chief Operating Officer of ASE, the world's largest chip packaging and testing house, agreed. “Politically it is the right thing,” Wu said. “And honestly, I don't think we have a choice not to do that.”

That reframing captures a shift already visible across the industry since TSMC's money is not only in Arizona, its Kumamoto plant in Japan began mass production in late 2024 and turned its first profit this year, and a fab in Dresden is due to start in 2027 to feed European carmakers. Japan is spending heavily to rebuild its own capacity, funnelling more than two trillion yen of state support into Rapidus, a state-backed venture running a two-nanometre pilot line in Hokkaido with mass production targeted for 2027. The United States has its CHIPS Act, and the message in every capital is the same, that leaving the most advanced chipmaking on a single island within range of Chinese missiles is a risk few governments still accept.

Europe Joins the Queue

The European Commission sent official Kilian Gross to Taipei to pitch a second Chips Act, part of a plan that also envisions building AI gigafactories to keep pace with the United States and China. Both Taiwan and the European Union have backed Ukraine against Russia, and both are locked in trade and diplomatic friction with Beijing. Deputy Foreign Minister Francois Wu, addressing the opening of the French pavilion, said Taiwan and France shared a commitment to democracy, freedom, and a rules-based international order, “we use technology to connect with the world, not to control it,” he added.

The arithmetic of Taiwan's position is now spread across three continents. Its firms are building in Arizona, Kumamoto, and Dresden, have pledged a further $20 billion in the United States, and are weighing European sites, while the bulk of the world's most advanced chips still come off production lines within a hundred miles of the Chinese coast. Tariffs on chips made outside America remain a live threat, and the agreement meant to soften them is not yet settled.

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