How Taiwan's biggest chip maker TSMC is caught in a tough spot, forced to heed the dictates of Trump's tech policy, while trying to keep many customers in China
Context & Ripple Effects
In October 2020, TSMC sat at the exact fault line of the first Trump-era tech restrictions: Washington's export controls bound the foundry's hands, while a large share of its customer base sat in China. The company had to comply with US policy without formally abandoning the buyers that helped build its scale.
That squeeze did not ease — it compounded. By early 2025, Trump was calling TSMC's business 'stolen' and the company was rushing to avoid tariffs, even convening its board in Arizona for the first time (TSMC's Arizona board meeting amid tariff pressure). In between, chairman Mark Liu publicly argued that US semiconductor localization would not improve supply-chain resilience (Mark Liu's case against forced localization), and analysts traced how the US push to cut dependency on Taiwanese chips reshaped TSMC's long-term business (the long-term impact of US dependency reduction).
First-order effects
- TSMC must comply with Trump-era export controls, directly constraining which Chinese customers can buy its most advanced chips and putting that revenue at risk.
- Chinese chip buyers face immediate loss of access to leading-edge foundry capacity, forcing them toward domestic alternatives or older process nodes.
Second-order effects
- Washington's dependency concerns push TSMC into US-based manufacturing commitments — culminating in the Arizona board meeting and tariff-avoidance efforts — while Liu argues the localization push does not actually improve resilience.
- China responds by hardening its own ecosystem, from domestic equipment requirements for new fab capacity to state-backed venture funds for early-stage hard-tech startups.
Third-order effects
- If the pattern holds, the semiconductor supply chain structurally bifurcates: one US-aligned network built around TSMC's American fabs, and a parallel Chinese stack built on domestic equipment and design — with TSMC permanently positioned as the asset both sides try to capture or contain.
- Taiwan's outsized economic role, visible in its own election politics over whether chips crowd out other sectors, becomes inseparable from great-power technology policy rather than a commercial matter.
The trend: Semiconductor manufacturing is splitting along US-China geopolitical lines, with TSMC as the single point both powers are trying to pull into their own orbit.