📰 In-Depth News Article
As the Trump administration doubles down on its protectionist trade strategies, including heavy tariffs and subtle diplomatic pressure, Taiwanese tech firms like TSMC are being nudged toward expanding operations in the United States. However, contrary to public concern, Taiwan’s Directorate General of Budget, Accounting and Statistics (DGBAS) firmly believes this shift won’t trigger an industrial hollowing out—a phenomenon that stunted Taiwan’s economic growth in the 1990s.
📉 Context: The Fear of Repeating History
In the 1990s, when Taiwan lifted its ban on investments in China, a wave of old-economy manufacturers—including textile, metal, and petrochemical companies—relocated to take advantage of low labor costs. Initially seen as a win, this movement soon backfired. Many of these firms lacked high-end R&D capabilities and eventually got overtaken by emerging Chinese counterparts. This led to Taiwan’s domestic manufacturing decline and years of sluggish growth, coining the term “industrial hollowing out.”
This historical backdrop has resurfaced amid TSMC’s US$165 billion pledge to expand its semiconductor empire in Arizona. While concerns are understandable, Taiwan’s current industrial strategy is significantly more resilient and sophisticated, DGBAS officials argue.
🧠 Why This Time is Different
According to DGBAS Department of Statistics chief Tsai Yu-tai, Taiwan’s current outward investments are not a cost-cutting measure but a strategy to maintain global competitiveness in a high-tech, innovation-driven world.
“TSMC and other firms are not leaving Taiwan—they’re expanding the ecosystem. The core R&D and latest know-how will stay in Taiwan,” said Tsai.
In contrast to old economy firms of the past, companies like TSMC are R&D-intensive and already dominate global markets. Their move to the U.S. is largely to serve American clients, mitigate geopolitical risks, and tap into U.S. capital and talent—not to replace Taiwan as a production hub.
🔬 TSMC’s Grand Vision in the U.S.
TSMC is building three advanced wafer fabrication plants, two IC assembly plants, and one R&D center in Arizona. This investment:
- Caters to American tech giants like Apple, Nvidia, and AMD.
- Is aligned with U.S. national security priorities to build domestic chip-making capabilities.
- Positions Taiwan as a leader in global semiconductor diplomacy.
The first fab began mass production in late 2024 using 4nm process technology. The second fab is under construction with a timeline set for 2028 to roll out 3nm, 2nm, and A16 processes. Plans for the third fab are in the pipeline.
Despite political pressures, TSMC remains committed to Taiwan as its innovation base. Taiwan’s skilled labor, efficient supply chain, and policy infrastructure for semiconductors remain unmatched.
💡 Broader Economic Strategy
Vice President of the Chung-Hua Institution for Economic Research (CIER), Wang Jiann-chyuan, echoed that investment in the U.S. should not be seen as industrial loss, but as economic expansion.
“We are exporting capital, not our core. Taiwan remains the heartbeat of the semiconductor world,” Wang stated.
Wang also highlighted that listing on U.S. capital markets (as many Taiwanese firms like UMC and TSMC do) can help raise international capital and improve their financial muscle.
Meanwhile, the Taiwanese government is actively working on policies to retain tech leadership at home, such as:
- Increasing R&D subsidies.
- Offering incentives to keep critical production in Taiwan.
- Expanding local talent pipelines in engineering and AI.
🌍 Global Strategy, Local Strength
Pai Tsung-cheng, head of the Supply Management Institute, summarized the shift well:
“If Taiwan can use the world as its base, it will open more doors for global business opportunities.”
Indeed, Taiwan’s strategy is not about retreating or surrendering its industrial might—it’s about diversifying risks while solidifying its role as a global innovation hub.
✅ FAQs
Will TSMC’s U.S. investment affect Taiwan’s domestic chip industry?
No. TSMC retains its R&D and cutting-edge technologies in Taiwan. The U.S. investments are to serve overseas clients and diversify risk.
Are other Taiwanese companies planning to follow TSMC into the U.S.?
Yes. Suppliers may follow TSMC for logistical synergy, but Taiwan will remain the epicenter of core operations and innovation.
Is this similar to the 1990s industrial hollowing out?
Not at all. In the past, firms moved for low-cost labor; today’s moves are strategic and based on technological cooperation and market expansion.
What role does the government play in this transition?
The Taiwanese government is offering R&D support, improving talent training, and ensuring the tech sector’s global competitiveness remains high.
