Matthew Brazil & Matthew Gabriel Cazel Brazil
Taiwan Semiconductor Manufacturing Company (TSMC), one of the most important firms globally, is evolving. In a quarterly earnings call last summer, the company announced a shift to a new “Foundry 2.0” model. This will see the company expand from its traditional wheelhouse of fabricating semiconductors to encompass packaging, testing, mask-making, and other parts of the value chain (TSMC, July 18, 2024). This shift comes with risks, as it is not guaranteed to be executed successfully.
The need to evolve was made clear on January 27, when U.S. President Donald Trump suggested imposing tariffs on imported chips to force manufacturing to return to the United States (C-SPAN, January 27). In response, Taiwan’s government stated that the current situation was “a win-win business model for Taiwan and U.S. industries” (Reuters, January 28; CNA, January 28).
TSMC has already begun diversifying, setting up plants in the United States and elsewhere. Much of this has less to do with the United States than with the People’s Republic of China (PRC). Under the leadership of Xi Jinping, the PRC has insisted on a path of potentially violent unification with Taiwan, which could jeopardize the company’s ability to operate. Therefore, TSMC has pursued diversification as a hedging strategy, a course of action that is also encouraged by its primary customers.
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