Walking a Tightrope: Navigating Taiwan-U.S. Semiconductor Security Under Trump 2.0

In January, DSET released the latest policy report titled “Walking a Tightrope: Navigating Taiwan-U.S. Semiconductor Security Under Trump 2.0” in response to Trump’s new term. The report provides a comprehensive analysis of the evolution and impact of U.S. export controls, investment review, the CHIPS Act, and tariff measures. Below are the report’s introduction and currently available chapters, with additional updates forthcoming.

Contents

1. Introduction－ Walking a Tightrope: Taiwan in the Era of “Trump 2.0”
2. Aligning Semiconductor Export Controls: Taiwan’s Strategy under Trump 2.0
3. Trump 2.0, Taiwan, and Transnational Investment Security
4. Carrots and Sticks? Taiwanese Supply Chains Under the 2nd Trump Administration
5. Policy Recommendations
6. Semiconductor Industry Policy Dynamics Under Trump 2.0 — An Interview with Chris Miller
7. Semiconductor Export Control Trends Under Trump 2.0 — An Interview with Kevin Wolf
8. Semiconductor Security Under Trump 2.0 — An Interview with Jimmy Goodrich
9. U.S.-China Semiconductor Competition Under Trump 2.0 — An Interview with Matthew Turpin
10. From Past Practice to Future Outlook: U.S. Export Controls and Taiwan – An Interview with Mi-Yong Kim
11. Future of U.S.-Taiwan Cooperation Under Trump 2.0 — An Interview with Kharis Templeman

Walking a Tightrope: Taiwan in the Era of “Trump 2.0”

On January 20, 2025, Donald Trump was inaugurated as President of the United States, marking his return to the White House. This event ushers in a new phase of U.S. leadership, characterized by unpredictability and carrying significant implications for the global political and economic landscape.

During the “Trump 1.0” era, the global landscape that had endured for over three decades underwent profound changes, leading to the rise of techno-geopolitics. President Trump initiated a wide-ranging confrontation with China, spanning a trade war and a contest for technological leadership. The COVID-19 pandemic further deepened global challenges, sparking a semiconductor shortage and a supply chain crisis.

At the same time, Russia’s invasion of Ukraine triggered sweeping sanctions from Western nations. Meanwhile, the launch of generative AI tools in 2022 marked a pivotal breakthrough in emerging technologies, heralding the dawn of the AI era.

Taiwan at the Center of Techno-Geopolitics: Opportunities and Challenges

These rapid and transformative events have propelled Taiwan into the global spotlight in the era of techno-geopolitics. At the center of this attention is TSMC, the pioneer of the semiconductor foundry business model and a global leader in advanced semiconductor research and production, which serves as a cornerstone of AI development.

TSMC represents more than a company—it embodies the culmination of over half a century of Taiwan’s thriving and well-integrated tech manufacturing ecosystem. This success is fueled by a dedicated and highly skilled engineering workforce whose expertise drives continuous innovation. Supported by a robust supply chain spanning upstream to downstream industries, Taiwan’s semiconductor ecosystem thrives on global collaboration, leveraging advanced equipment, materials, and knowledge from international partners. These factors position Taiwan as an indispensable player on the global stage.

However, in the era of techno-geopolitics, the foundation of global collaboration has begun to erode. Democratic nations, led by the United States, are now engaged in fierce competition with China over advanced technologies and supply chains. This shift has initiated a global reimagining and restructuring of the geopolitical order. Amid this, Taiwan, an island nation under constant military threat from China, has achieved extraordinary success in technological innovation. Yet, Taiwan and its tech ecosystem walk a perilous tightrope, where maintaining momentum is essential to avoid falling behind. In this high-stakes environment, hesitation is not an option.

Over the past four years, the Biden administration has continued the U.S.-China strategic competition initiated during the Trump 1.0 era. The administration’s “Small Yard, High Fence” strategy in semiconductor export controls has targeted cutting-edge technologies like AI and supercomputing. Toward the end of Biden’s term, these restrictions were further tightened to counter China’s rapid advancements in AI. Despite these challenges, Taiwan’s semiconductor supply chain, led by TSMC, has shown resilience. The booming AI market and strong U.S. demand have mitigated the impact of these controls, with some Taiwanese firms even benefiting from the decoupling of supply chains with China.

Meanwhile, the U.S. CHIPS and Science Act, with its substantial subsidies, prompted TSMC to establish an advanced fab in Arizona. This move introduced uncertainty to the Taiwan-centered semiconductor model that had thrived for three decades. Moreover, strategies like “derisking” and the “Taiwan plus one” approach have further tested the efficiency and cohesion of Taiwan’s semiconductor ecosystem.

Trump 2.0: Uncertainty and Unpredictability

Aligned with broader perspectives, we believe the Trump administration will adopt a more “transactional” approach to foreign relations. For Taiwan, unpredictability is emerging as the defining feature of the new global order being shaped during the Trump 2.0 era.

In contrast to the Biden administration’s consensus-driven and carefully calibrated export controls, the Trump administration is likely to favor simpler, faster measures such as tariffs or entity lists to curb China’s technological rise. U.S.-China competition may also be influenced by powerful figures like Elon Musk, whose sway over President Trump could shape critical decisions.

Amid this uncertainty, Taiwan must focus on securing bipartisan support within both the White House and Congress to safeguard its interests. 

Under Trump’s preference for transactional policies with allies, Taiwan’s semiconductor investments in the U.S. could face intense pressure. The administration might actively demand TSMC to expand and accelerate its R&D and manufacturing activities in the U.S. While the CHIPS Act promises subsidies, it also introduces uncertainty, as the federal government could push TSMC to scale up its operations on US soil more quickly than planned.

Regardless of whether it’s under Biden or Trump, the U.S. federal government has a core policy goal that clashes with Taiwan’s national interests: reducing reliance on Taiwan as the sole hub for advanced semiconductor manufacturing. While this started as a national security objective, it has increasingly shifted toward reviving U.S. domestic manufacturing and creating jobs. Taiwan’s strategists need to work harder to convince its key allies that preserving Taiwan’s efficient and innovative tech ecosystem is essential for staying ahead in the U.S.-China tech rivalry.

On the other hand, under Xi Jinping, China’s policies are creating tougher challenges for Taiwan. What used to be a complementary trade and supply chain relationship is quickly turning into competition. China has doubled down on its state-led industrial policies, mobilizing public and private capital, subsidizing industries, and leveraging its massive domestic market to achieve supply chain self-sufficiency. From emerging technologies to mature foundational ones, China is striving to dominate global markets and has become an even bigger threat to Western economies.

Over the past two decades, China has successfully overtaken democratic countries in several industries, including Taiwan’s dominance in displays and solar panels. The U.S.-China rivalry initiated during the Trump 1.0 era, coupled with the pandemic’s spike in semiconductor demand, gave Taiwan’s chip industry a rare historical advantage. This momentum allowed Taiwan to ride the AI boom and achieve greater success.

However, as U.S. export controls block China’s access to advanced chips, China is pivoting to its strength: subsidizing and dominating the foundational chip supply chain outside U.S. restrictions. Although Taiwan still holds the lead in global market share, this advantage is fading fast. By 2027, China could surpass Taiwan as the leader in foundational chips. Without effective strategies from the U.S. and its allies, Taiwan risks losing its semiconductor edge, while China could gain more chokeholds over critical supply chains, giving it a powerful upper hand in the global tech race.

Leveraging the “Silicon Shield”: Sustaining Taiwan’s Survival and Prosperity 

Taiwan, situated at the forefront of both geopolitical and technological competition, sees its semiconductor industry playing a vital role in safeguarding its core national interests—survival and prosperity.

In recent years, a series of geopolitical developments have highlighted the critical importance of Taiwan’s semiconductor industry, sparking widespread discussions about the so-called “Silicon Shield.” These debates have gained traction both domestically, as Taiwan becomes more aware of its increased international visibility and bargaining power, and internationally, particularly among allied nations. Some view the “Silicon Shield” as a strategic asset that deters China’s coercive actions by compelling allies to share the risks associated with protecting Taiwan. Others, however, offer more critical assessments of this strategy.

Regardless of differing opinions, Taiwan’s value in technological geopolitics is poised to grow, as advancements in semiconductor R&D, manufacturing, and innovation are becoming increasingly central to artificial intelligence and other emerging technologies.

If Taiwan’s position as a global semiconductor manufacturing hub remains firmly irreplaceable by any other country or region in the short term, policy and business strategists in Taiwan must carefully consider how to fully leverage all the resources available to this island nation—including the so-called “Silicon Shield”—to sustain the prosperity of Taiwan’s industries and ensure the security and continued survival of Taiwan as a de facto independent state in an increasingly uncertain future.

DSET, founded in 2023, is a Taiwan-based public policy think tank dedicated to safeguarding the sustainability and vitality of democracy. Over the past 15 months, DSET has established itself as a key “Track 1.5” platform in the field of techno-geopolitics, facilitating frequent exchanges of information and ideas, as well as collaborative research and policy reports, with counterparts in the United States, Europe, Japan, and South Korea—countries that share the values of freedom and democracy.

This report serves a dual purpose. First, it forecasts the potential impacts of U.S. policies under a “Trump 2.0” administration over the next four years on Taiwan’s semiconductor industry and economic security. Second, it aims to guide Taiwan’s government and businesses in crafting effective strategies to address these challenges and opportunities.

This report outlines key recommendations and strategies to address challenges within Taiwan’s existing institutional framework:

1. Reforming Government Decision-Making and Economic Security Frameworks

How can Taiwan modernize its bureaucratic system to tackle the complex challenges of technological geopolitics? Achieving this requires comprehensive reforms to government decision-making processes and regulatory frameworks for economic security. By enhancing institutional adaptability and resilience, Taiwan can better respond to the multifaceted demands of the global tech landscape.

2. Maximizing National Interests Through Semiconductor Cooperation

How can Taiwan leverage its semiconductor industry to secure the greatest national benefits? This question lies at the heart of Taiwan’s relations with democratic partners like the United States, Japan, and Europe. While these nations seek to reduce their dependence on Taiwan’s semiconductor manufacturing and promote domestic production, Taiwan must navigate these conflicting policy goals carefully. The challenge is to collaborate effectively with allies while safeguarding Taiwan’s national interests and achieving mutually beneficial outcomes.

3. Addressing Economic Security Challenges in the Context of Cross-Strait Relations

How can Taiwan strengthen its economic security in the face of complex relations with China? This requires overcoming internal political divisions and conflicting economic interests to modernize Taiwan’s vulnerable economic security regulations. Moreover, Taiwan must collaborate with the United States and other like-minded countries to protect its critical technologies and industries from state-backed Chinese competitors. A central focus of this report is the reform of Taiwan’s economic security regulatory framework, offering actionable strategies to enhance Taiwan’s competitiveness and ensure its security against both domestic and external pressures.

Since President Trump’s reelection, the DSET Economic Security Research Program has conducted a series of interviews, both in person and online, with 12 key individuals—six from the United States and six from Taiwan—who have played pivotal roles in shaping semiconductor strategy in Washington, D.C., and Taipei.

On the U.S. side, interviewees included university and think tank scholars as well as former federal officials from previous administrations. On the Taiwan side, six anonymous current and former officials involved in national and economic security policymaking shared their perspectives. The insights from these individuals, who have been directly engaged at the forefront of semiconductor and national security strategies, provide invaluable material for this report.

With the consent of the U.S. interviewees, full transcripts of their interviews are included as an appendix to this report. The interviewees are:

• Prof. Chris Miller: Author of Chip War and Professor at Tufts University.
• Mr. Kevin Wolf: Former Assistant Secretary of Commerce for Export Administration during the Obama administration, current partner at Akin Gump, and Senior Visiting Fellow at the Center for Security and Emerging Technology (CSET).
• Mr. Matt Turpin: Former National Security Council’s Director for China during the Trump 1.0 administration, where he led U.S. strategies on technological competition with China.
• Mr. Jimmy Goodrich: Former Director of Global Policy at the Semiconductor Industry Association and current Senior Advisor at the RAND Corporation, specializing in technology and national security issues.
• Prof. Mi-Yong Kim: Former senior export control officer at the U.S. Bureau of Industry and Security (BIS), with 30 years of service, including two postings in Taiwan managing U.S.-Taiwan economic security cooperation at the American Institute in Taiwan (AIT).
• Dr. Kharis Templeman: Co-author of Silicon Triangle and a leading expert at the Hoover Institution, Stanford University—Silicon Valley’s premier think tank on technology and geopolitical policy.

These interviews offer critical perspectives from individuals deeply involved in semiconductor and national security policymaking, greatly enriching the analysis presented in this report.