Taiwan and the United States recently signed the Agreement on Reciprocal Trade, a controversial deal mandating massive Taiwanese investments in America. The agreement commits Taiwan to invest at least $250 billion while requiring the government to provide an additional $250 billion in credit insurance guarantees.
These severe financial terms have sharply divided domestic public opinion across Taiwan. A senior semiconductor industry analyst argues that while expanding into the United States is not the preferred course for chipmakers, domestic constraints leave companies with very little choice.
Driven By American Customer Demand
This stark assessment was delivered during the "2026 Breakthrough Forum" hosted at National Taiwan University on March 28. The expert panel brought together prominent economists, technology analysts, and diplomacy professors to debate whether the trade agreement actually benefits Taiwan.
John Chen (陳子昂), a prominent technology analyst, noted that the United States historically relied heavily on Malaysia for semiconductor imports due to back-end packaging operations. However, Taiwan recently surpassed Malaysia to become the leading supplier, triggering intense scrutiny from the Trump administration.
While the U.S. government remains visibly uncomfortable with its heavy dependence on Taiwanese manufacturing, the situation reflects straightforward market logic. TSMC's principal clients are all American technology giants, and more than 80% of the manufacturer's orders this year will originate from U.S. customers.
Chen pointed to strong structural demand severely straining the industry's near-term production trajectory. The rapid migration of advanced processors to sub-3-nanometer manufacturing has driven capacity growth exceeding 40% for four consecutive years, proving supply simply cannot keep up with explosive demand.
The Heavy Cost Of American Production
For Taiwanese firms considering a mandatory shift to U.S.-based manufacturing, gross profit margin remains the decisive variable. Production costs in the United States are simply too high for many traditional technology sectors to absorb the difficult transition.
While manufacturers of high-margin graphics cards and servers could potentially survive the move, producers of automotive components and laptop computers would likely find U.S. operations financially unviable. For TSMC specifically, investing heavily in the United States is absolutely not the company's first choice.
Even with robust gross margins, a massive shift toward American manufacturing will inevitably dilute those crucial profits. The new trade agreement ultimately represents a continuation of the Trump administration's aggressive tariff-as-leverage strategy designed to forcefully relocate manufacturing jobs.
Moving massive productive capacity to the United States will inevitably damage Taiwan's domestic exports and overall gross domestic product. However, because customer commitments have already fully reserved output capacity for TSMC's new American fabrication plants, near-term financial concerns remain somewhat limited before 2028.
Evaluating The Massive Financial Commitments
Regarding the structural design of the trade agreement, the proposed "Taiwan Model Zone" will likely be located in the American South. This initiative is being pursued through a direct government-to-government framework intended to deliver a streamlined investment environment.
Chen drew a pointed contrast with recent Taiwanese policy history, noting that direct government cooperation proved largely unworkable during the previous administration's New Southbound Policy. The current administration is now actively attempting to revert to the more traditional government-to-government diplomatic model.
When evaluating the feasibility of the agreement's massive financial commitments, Chen offered a highly differentiated assessment. He stated that committing $250 billion in Taiwanese corporate investment to the United States remains highly feasible given the current booming industry demand.
Conversely, he warned that securing the additional $250 billion in government credit insurance guarantees will not be easy to achieve. Chen concluded by reiterating that Taiwan remains the absolute optimal operating environment for semiconductor manufacturing due to its unmatched domestic supply chain.
Despite nagging domestic water and power constraints, Taiwan's supporting infrastructure remains vastly superior to that of the United States. TSMC's massive American expansion is ultimately a reluctant response to severe tariff pressure and customer demands rather than a genuine strategic preference. （Related： 'Go Get Your Own Oil': Trump Gives Iran War a Three-Week Expiration Date ｜ Latest ）
