Taiwan flexes chip diplomacy muscles as it faces pressure to share AI wealth with allies

Taiwan flexed its chip diplomacy muscles at a major trade show last ​week, portraying itself as a democratic and reliable ​supplier for the AI revolution, while signalling a willingness to share the benefits of ​its semiconductor prowess with like-minded partners.

Home to companies like TSMC whose chips power AI applications, diplomatically isolated Taiwan has long sought to leverage its tech prowess to garner international support, something Beijing routinely seeks to block saying the island is merely one of its provinces.

But ‌Taiwan also faces pressure ⁠from ⁠the United States, its most important international backer and arms supplier, to shift more chip manufacturing there. That comes as TSMC is investing $265 billion ​in factories in the state of Arizona.


President Lai Ching-te, who, unusually, spoke at two separate events on the same day at the ​SEMICON Taiwan trade show, said Taiwanese companies were expanding globally to "let resilience create shared prosperity", and that the island's chip strength was based on democracy and rule of law.

Economy Minister Kung Ming-hsin, opening the U.S. pavilion at the show, ​said Taiwanese companies were planning an additional $20 billion of investment in the country.

CHIP ⁠TARIFFS

Taiwan struck ‌a deal with Washington earlier this year to increase investment in the U.S. in exchange ​for reduced export ​tariffs, but uncertainty remains.

U.S. Commerce Secretary Howard Lutnick told CNBC last week that semiconductor tariffs ⁠were coming for companies that do not make chips in the U.S.

Still, ​Bill Frauenhofer, the Commerce Department official overseeing the tariff agreement with Taiwan, struck an ​upbeat tone during 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."

Taiwanese firms acknowledge the need to expand manufacturing beyond the island.

Young Liu, chairman of Foxconn, Nvidia's largest AI server maker, said companies now had to "think about how to make with Taiwan, not in Taiwan; make with Taiwan in the country where the market is".

Responding to Liu during the panel ‌discussion, Tien Wu, chief operating officer of ASE, the world's largest chip packaging and testing provider, said he agreed.

"Politically it is the right thing," Wu said. "And honestly, I don't think we have ​a choice not ​to do that."

EU WANTS INVESTMENT TOO

Taiwan ⁠is also seeking to deepen ties with the European Union, which likewise wants greater investment from Taiwanese companies. The bloc sent European Commission official Kilian Gross to SEMICON to pitch the bloc's Chips Act 2.0 to Taiwanese officials ​and companies.

Taiwan has sought closer cooperation with the EU not only because both have strongly backed Ukraine in the war with Russia, but also because both face trade and diplomatic disputes with China.

Deputy Foreign Minister Francois Wu, one of Taiwan's most prominent diplomats, told the opening of the French pavilion that Taiwan and France shared the values of democracy, freedom and a commitment to a rules-based international order.

"We use technology to connect with the world, not to control it," he added.