Taiwan has rejected a U.S. proposal for a 50/50 split in semiconductor production, emphasizing its commitment to maintaining control over its 'silicon shield,' which has significant implications for global supply chains.

Following recent talks, Taiwan's government is seeking a more favorable tariff rate from the U.S., describing progress in negotiations, as TSMC announced a massive $165 billion investment in U.S. fabs to diversify manufacturing amid geopolitical tensions.

The semiconductor industry faces challenges like high capital costs, talent shortages, infrastructure gaps, and geopolitical risks, prompting strategic alliances, increased R&D, and a focus on sustainability.

Despite higher costs—estimated at 5-10% for advanced nodes—industry demand, especially for AI chips, is driving diversification efforts in regions like Southeast Asia and India to mitigate geopolitical risks.

This shift aims to reduce reliance on East Asian manufacturing, address international demands, and respond to the AI industry’s rapid growth, with countries worldwide investing in self-reliant ecosystems through initiatives like the US CHIPS Act.

The reshaping of supply chains supports the growth of AI, 5G, IoT, and high-performance computing, with the global semiconductor market projected to reach $1 trillion by 2030.

TSMC maintains a strong financial position, with a robust balance sheet indicated by a high current ratio and low debt-to-equity ratio, though sector risks and geopolitical tensions remain significant for investors.

Major semiconductor firms like TSMC, Samsung, and Intel are expanding their advanced process technologies, driven by geopolitical tensions and U.S. subsidies, while tech giants like NVIDIA and Apple rely heavily on these chips for AI and other high-tech applications.

The U.S. government has introduced $39 billion in subsidies through the CHIPS and Sciences Act to encourage domestic production, attracting investments from leading companies and intensifying global industry competition.

Achieving the U.S. goal of 40% domestic chip production could require investments exceeding $500 billion, highlighting the high costs of onshoring semiconductor manufacturing.

The Trump administration has threatened to impose tariffs up to 100% on imported semiconductors unless companies meet a 1:1 domestic-to-import production ratio, with exemptions for those increasing U.S. manufacturing.

Long-term, these policies are fostering a trend toward regionalized supply chains, increased U.S. and allied investments abroad, and shifting global power dynamics, especially with China pursuing semiconductor self-sufficiency.