Fear and resignation after ‘world’s most powerful company’ pays Trump a $100 billion ‘protection fee’

It was a shock ceremony on the White Home presided over by President Donald Trump to unveil a $100 billion funding from what he known as the world’s strongest firm, Taiwan Semiconductor Manufacturing Firm (TSMC).

However practically 8,000 miles away, the temper was removed from celebratory. As an alternative, the shock announcement final week has reignited fears in Taiwan about shedding its crown jewel, its world-beating semiconductor business, to the US as a result of political strain.

The island democracy’s former President Ma Ying-jeou wasted no time in accusing the ruling Democratic Progressive Get together (DPP) of “promoting TSMC” to Trump as a “safety charge.”

“This can be a main nationwide safety disaster,” Ma, a member of the opposition Kuomintang (KMT), wrote on his Facebook page on March 4, shortly after the White Home signing ceremony. It is going to “’have a big unfavourable affect on folks’s confidence, cross-strait relations and Taiwan’s future geopolitical place.”

To reassure the general public, Taiwan President Lai Ching-te appeared alongside TSMC CEO CC Wei final week at Taipei’s presidential workplace, saying the corporate’s US funding wouldn’t undermine its dedication to and deliberate growth in its dwelling base.

TSMC produces greater than 90% of the world’s superior microchips, which energy all the pieces from smartphones and synthetic intelligence to weapons. That’s why many in Taiwan imagine that international dependence on its semiconductors serves as a “silicon defend,” a deterrent in opposition to a possible Chinese language invasion.

China’s ruling Communist Get together claims Taiwan as a part of its territory regardless of having by no means managed it and has vowed to take management of the self-governing island, by power if needed. Beijing has lately escalated its army actions round Taiwan, usually flying fighter jets and conducting workout routines in waters close to the island.

‘Ukraine right this moment, Taiwan tomorrow’

Taiwan depends on US army and political help. Underneath the Taiwan Relations Act, the US is legally obligated to supply Taiwan with the means to defend itself in opposition to a potential assault by China.

However Trump’s latest rhetoric has solid uncertainty over the way forward for US-Taiwan relations. He has repeatedly accused Taiwan of “stealing” the US semiconductor business, a declare that’s widely disputed, whereas saying outright that Taiwan ought to pay the US for “safety.”

For a lot of on the self-governing island, the phrase “Ukraine right this moment, Taiwan tomorrow” has more and more resonated in latest weeks as they watch Trump upend longstanding US coverage by enjoying up Kremlin rhetoric and warming to Moscow, whereas alienating conventional European allies and Kyiv. Taiwanese see parallels between their democracy and Ukraine, with each going through existential threats from aggressive, expansionist neighbors.

Washington earlier this month abruptly suspended army support to Ukraine following a heated trade between Trump, Vice President JD Vance and Ukrainian President Volodymyr Zelensky on the White Home, simply hours after the cheerful TSMC ceremony. It reinstated aid this week after Ukraine accepted a 30-day US-proposed ceasefire. The White Home has additionally pressed Zelensky to sign a deal giving the US entry to Kyiv’s untapped mineral riches.

Tammy Chao, a retiree, expressed deep concern to CNN about Taiwan’s safety after TSMC’s announcement, likening Trump’s method to his dealing with of Ukraine. She described him as a “seller” who may finally deal with Taiwan as a bargaining chip.

“Taiwan, fairly quickly identical to [what] he mentioned to Zelensky, ‘you don’t have any playing cards to play,’ and Taiwan will not be gonna have playing cards to play,” she mentioned. “TSMC was one of the best card.”

However others seem much less involved. Fred Lin, a finance business skilled, mentioned he believed TSMC got here to this resolution prudently.

“Who doesn’t pay safety charges to the US? Little doubt It’s a type of safety charge, that we will perceive, however that’s the truth of worldwide politics,” he mentioned.

Trump administration officers, nevertheless, have additionally mentioned they should dial down involvement in European safety to focus on Asia – and the menace from China. Previous to his election, Vance was express in his issues that US help for Ukraine may hinder its ability to aid Taiwan within the occasion of a Chinese language assault.

Researchers say there are limits to comparisons between Ukraine and Taiwan’s safety circumstances and imagine the island’s safety is influenced by a number of components past its semiconductor business, together with China’s broader geopolitical ambition and Taiwan’s strategic location.

Whether or not China takes army motion in opposition to Taiwan is in the end pushed by its core pursuits, which aren’t solely depending on the island’s position in international chip manufacturing, mentioned Min-yen Chiang, a nonresident fellow on the Analysis Institute for Democracy, Society, and Rising Expertise, a government-funded assume tank in Taipei.

He referenced the time in 1950 when the US despatched its Seventh Fleet to the Taiwan Strait early on in the course of the Korean Struggle to discourage China from invading Taiwan. The strategic transfer by then-President Harry Truman neutralized the Taiwan Strait and ensured the Korean Struggle didn’t set off a wider battle, sustaining stability within the Asia-Pacific area.

“Taiwan then had no semiconductor business in any respect,” he mentioned.

Nonetheless dedicated

Final week, President Lai mentioned Taipei didn’t “face any strain from Washington” in doing the TSMC deal, which the corporate mentioned was the largest such funding within the US ever made by a non-American agency.

Standing subsequent to him, Wei attributed the elevated funding to “sturdy demand” from American clients equivalent to Apple, Nvidia, AMD, Qualcomm and Broadcom that wished to scale back potential provide chain dangers by having chips made domestically.

TSMC was awarded $6.5 billion in grants for its first three vegetation in Arizona beneath the bipartisan Chips Act, spearheaded by the Biden administration, which allotted $39 billion in federal funding to spice up home semiconductor manufacturing.

“We’re one of the best wherever we construct our fabs,” Wei added, referring to semiconductor fabrication vegetation.

Together with the extra three manufacturing services, the brand new funding additionally promised two chip packaging vegetation and a analysis and improvement middle to enhance the manufacturing course of expertise.

Wei clarified that the event of the cutting-edge subsequent technology chipmaking expertise would stay in Taiwan and would nonetheless be 10 instances larger than the US services.

Semiconductor analysts applauded the corporate for making an “agile” resolution.

TF Worldwide Securities analyst Ming-Chi Kuo praised TSMC in an online analysis, calling it the “most profitable non-US firm in negotiations with the Trump administration.”

“Although the $100 billion funding appears huge, the shortage of particulars offers the pliability for spending primarily based on future situations, softening the affect on profitability,” Kuo wrote.

TSMC’s funding has principally alleviated Trump’s issues, based on Eric Chen, an analyst at Digitimes Analysis, a market analysis agency. “However after all, we now have no approach of understanding when Trump may change his stance — he’s infamous for making sudden U-turns,” he mentioned.

He additionally added that TSMC was “not afraid” of Trump doubtlessly scrapping the subsidies from the Chips Act, stressing that the corporate’s resolution to spend money on the US was pushed by buyer wants.

Weaponizing tariffs

TSMC’s $100 billion funding marks the newest in a wave of companies committing huge sums to the US. But it surely stands out as one of many first main international companies to take action, and Trump claims extra such investments are on the best way.

In distinction to his predecessor Biden’s method of incentivizing home funding by way of subsidies, Trump prefers to weaponize tariffs. To date, it has confirmed efficient.

Trump has previously threatened to impose 25% tariffs on semiconductors, together with cars and prescribed drugs as early as subsequent month. On the announcement of TSMC’s funding, Commerce Secretary Howard Lutnick mentioned the corporate selected to broaden within the US because of the menace of tariffs, and weren’t given further grants.

In late February, Apple pledged $500 billion to broaden services, manufacturing and tasks throughout the US over the subsequent 4 years. Oracle, OpenAI and SoftBank announced in January that they’d make investments $500 billion to create a brand new firm that will construct synthetic intelligence infrastructure within the US.

With TSMC’s new funding within the US, Trump is anticipated to show up the warmth on different main corporations, mentioned Chang-Tai Hsieh, an economist on the College of Chicago’s Sales space College of Enterprise.

He mentioned it places added strain on Samsung and Intel, the 2 different main producers of computing and AI chips on the planet.

South Korea’s SK Hynix, one other key participant in reminiscence chips together with Samsung, are additionally anticipated to really feel the squeeze. Samsung has beforehand pledged to invest $37 billion in Texas, whereas SK Hynix introduced plans to construct a $3.87 billion chip packaging plant in Indiana final 12 months. Samsung and SK Hynix declined to remark.

Hsieh mentioned it’s apparent that corporations like TSMC and others must “do no matter they will to make Trump completely satisfied.” However he additionally warned of the dangers related to such concessions.

“When you comply with blackmail, then there’s no finish of it,” he mentioned.

CNN’s Simone McCarthy contributed reporting.

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