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
The island's biggest chip maker has been a coveted partner to both battling giants. But rising nationalism is making it harder to keep the middle ground. Tweets: @gavinsbaker , @nytimesbusiness , @zhonggg , @chinausfocus , @wearytolove , @jaygoldberg , @nytimesbusiness , and @jchengwsj Tweets: Gavin Baker / @gavinsbaker : Taiwan as the new Arrakis. And the most poetic description I've ever read of semiconductor manufacturing, which is absolutely the closest thing to magic in this world. https://www.nytimes.com/... https://twitter.com/... @nytimesbusiness : The U.S. campaign against Huawei has forced TSMC to turn against one of its biggest customers https://www.nytimes.com/... Raymond Zhong / @zhonggg : People in Taiwan have long seen China's reliance on Taiwanese-made chips as a bulwark against military aggression. But how much longer will that be true if the U.S. continues blocking Chinese companies from working with global chip makers? https://www.nytimes.com/... @chinausfocus : “The United States and China are wrestling to lead the world in cutting-edge technologies. But the real wizardry that makes those advancements possible is being performed on a yam-shaped island that sits between them,” reports @nytimes. https://ow.ly/... Austin H. Wang / @wearytolove : The translation is gold. “A hundred thousand youths, a hundred thousand livers, shift by shift TSMC is saving Taiwan” https://www.nytimes.com/... @jaygoldberg : Really good overview on the TSMC/Huawei US/China situation in the NY Time today. With a quote from yours truly. https://www.nytimes.com/... @nytimesbusiness : “China has virtually no room for maneuver,” the head of technology research at New Street Research said. “The U.S. definitely has the upper hand in the struggle.” https://www.nytimes.com/... Jonathan Cheng / @jchengwsj : In the high-stakes tech fight, Taiwanese chipmaker TSMC had been playing Finland: a sometime friend to both feuding giants. But that is not the way the tech world works anymore. “China has virtually no room for maneuver.” @zhonggg from a yam-shaped island. https://www.nytimes.com/...
Context & Ripple Effects
In October 2020, TSMC sat at the exact midpoint of the US-China tech conflict: Washington's export rules forced it to stop shipping leading-edge chips to Huawei, yet most of its customer base remained in China. The company had spent years being a coveted partner to both sides, but rising nationalism on each was closing the middle ground it occupied.
The aftermath played out over the following three years. TSMC chair Mark Liu repeatedly defended the company's position — arguing in later interviews that the 2020 Huawei cutoff was a turning point and that US semiconductor localization would not actually improve supply chain resilience. Meanwhile, Taiwan's centrality hardened into what analysts called a "silicon shield" against Chinese invasion, even as Washington began working to reduce its own dependency on the island.
First-order effects
- Huawei immediately loses access to TSMC's advanced chips, forcing the Chinese champion onto older or domestically sourced silicon.
- TSMC must comply with Trump-era US export dictates while keeping its remaining Chinese customers — every new US rule narrows the revenue base it can defend.
Second-order effects
- China responds by accelerating self-sufficiency: retrofitting older ASML DUV lithography tools for advanced production, launching multi-billion-dollar hard-tech venture funds, and reportedly requiring at least 50% domestically made equipment for new fab capacity.
- Huawei's supply chain localizes fast — Nikkei teardowns show Chinese-made components climbing from 32% of comparable phones in 2023 to 57% in the Mate 70 Pro and Pura 80 Pro — shrinking the addressable market for foreign chip suppliers.
Third-order effects
- The US push to cut China off from key semiconductor supplies while reducing dependency on Taiwanese chips points toward a bifurcated industry, one TSMC chair Mark Liu argues localization will not make more resilient — leaving the foundry squeezed from both directions.
- If the pattern holds, Taiwan's manufacturing centrality becomes simultaneously its economic moat and its geopolitical exposure — the "silicon shield" cuts both ways as each superpower builds alternatives.
The trend: The global chip supply chain is bifurcating along US-China lines, converting TSMC's neutral manufacturing position into an untenable one and making compute capacity itself an instrument of statecraft.