BREAKINGVIEWS-TSMC's $100 bln gamble jeopardises 'Taiwan First'

By Robyn Mak

HONG KONG, March 4 (Reuters Breakingviews) - TSMC is on a slippery slope. Taiwan Semiconductor Manufacturing 2330.TW, the world's largest chipmaker, on Monday pledged $100 billion in fresh funds to build factories in the United States. It also committed to set up a major research and development centre stateside, despite an earlier assurance from boss C.C. Wei to keep innovation on the company's home island. That's a threat to Taiwan in multiple ways.

Standing beside U.S. President Donald Trump at the White House, Wei unveiled the new plans. As part of the expansion, the $800 billion company will build five more leading-edge chipmaking and advanced packaging facilities. That will bring TSMC's total investment stateside to a whopping $165 billion.

Until now, these investments seemed a small price to pay to protect its most important market. Trump has threatened 25% or more tariffs on semiconductor imports and accused Taiwan of stealing America's chipmaking industry. TSMC is even considering taking a stake in its struggling rival Intel's INTC.O factories at the behest of Washington, Bloomberg reported last month, citing sources.

Expanding its American footprint makes some sense. Demand for chips used to power artificial intelligence models is expected to remain strong, so there may be some financial justification to add capacity in the world's biggest economy. There also was no timeline given on the new investments: That implies TSMC has flexibility to pace its spending, raise prices or cut costs elsewhere if needed, Bernstein analysts say.

But it is increasingly clear that making high-end chips in the U.S. risks diluting TSMC's "Taiwan First" pledge. Wei had wanted to keep the chipmaker "rooted in Taiwan" and to retain its most advanced tech at home. The reason is partly practical. Early production of new chips involves a lot of trial-and-error and requires close coordination and proximity with R&D teams. It therefore makes sense to have the most advanced chips made first in Taiwan.

That TSMC is now building a "major" R&D centre abroad should worry officials in Taipei. For years, Taiwan has faced increased military pressure from Beijing, which views the island as its own territory. The enormous disruption that military conflict would inflict on global semiconductor supply chains is a core part of the deterrence. But the more that TSMC replicates its business offshore, the more this protection will erode.

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CONTEXT NEWS

Taiwan Semiconductor Manufacturing on March 4 said it will expand its investment in the U.S. by an additional $100 billion, bringing the total amount pledged to $165 billion. The company announced the plan as CEO C.C. Wei met with U.S. President Donald Trump at the White House.

As part of the expansion plans, the company will build three new chipmaking plants, two advanced packaging facilities and "a major R&D team center".

TSMC shares fell 1.5% to T$1,005 during early morning trading on March 4.