Taiwan is concerned about losing its “silicon shield” as the rest of the world pursues TSMC.

Hong Kong CNN — US President Joe Biden and Apple CEO Tim Cook honored TSMC this week during a ceremony to unveil its $40 billion manufacturing site in Arizona — a massive investment designed to help secure America’s supply of the most advanced chips.

Back in Taiwan, however, there is growing concern about the increasing political and commercial pressure on the world’s largest chipmaker to expand internationally. The company is constructing a facility in Japan and is considering expanding into Europe.

“They’re comparable to the Hope Diamond of semiconductors.” “Everyone wants them,” G said. Dan Hutcheson is the vice chair of TechInsights, a chip research organization. (The Hope Diamond, the world’s largest blue diamond, is now on display at the Smithsonian Institute’s National Museum of Natural History in Washington, DC.)

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“Chinese customers want them to build there.” Customers in the United States want them to be there. “And customers in Europe want them to be there as well,” he added.

Aside from the risk that TSMC will take its most advanced technology with it, depriving Taiwan of one of its unique assets and reducing job opportunities in the country, there are concerns that a reduced presence for the company will expose Taipei to greater pressure from Beijing, which has vowed to take control of the self-ruled island by force if necessary.

TSMC is regarded as a national treasure in Taiwan, supplying tech titans such as Apple (AAPL) and Qualcomm (QCOM). It mass-produces the world’s most advanced semiconductors, components critical to the operation of everything from smartphones to washing machines.

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The company is regarded as being so valuable to the global economy and to China — which claims Taiwan as its own territory despite never having controlled it — that it is sometimes referred to as part of a “silicon shield” against a potential military invasion by Beijing. The presence of TSMC provides a strong incentive for the West to defend Taiwan against any forceful Chinese takeover.

“The idea is that if Taiwan becomes a semiconductor powerhouse, America will have to support and defend it,” Hutcheson explained. “The strategy has proven to be extremely effective.”

What’s the deal?
A day before Tuesday’s Phoenix ceremony, Chiu Chenyuan, a Taiwan People’s Party lawmaker, questioned Foreign Minister Joseph Wu about a “secret deal” with the US to disadvantage Taiwan’s chip industry.

According to Chiu, the chip giant is under political pressure to relocate its operations and most advanced technology to the United States. He cited the transfer of 300 people to the Arizona plant, including TSMC engineers. In response, Wu stated that there was no secret deal and that there was no attempt to downplay Taiwan’s importance to TSMC.

According to Patrick Chen, the Taipei-based head of research at CL Securities Taiwan, there is widespread concern on the island about TSMC’s growing international importance, the pressure it is under to expand, and the implications for Taiwan.

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CNN has reached out to TSMC for comment on its expansion plans.

TSMC’s CEO, CC Wei, previously stated that “every region is important to TSMC,” and that the company would “continue to serve all customers all over the world.”

Increasing significance
TSMC, founded by Morris Chang in 1987, is not a household name outside of Taiwan, despite producing an estimated 90% of the world’s super-advanced computer chips.

Semiconductors are an essential component of almost every electronic device. They are difficult to produce due to the high cost of development and the level of knowledge required, resulting in a concentration of production among a few suppliers.

Concerned about losing access to critical chips, particularly as tensions between China and the United States, as well as between Beijing and Taipei, governments and major consumer-facing companies such as Apple, according to experts, have asked semiconductor companies to localize their operations.

“TSMC’s decision to expand its Arizona investment demonstrates that politics and geopolitical risks will play a larger role in supply chain decisions than previously,” said Chris Miller, author of “Chip War: the Fight for the World’s Most Critical Technology.”

“It also suggests that TSMC’s customers want more geographic diversification, which was not previously a major concern of major customers.”

TSMC announced on Tuesday that it was increasing its investment in the United States by constructing a second semiconductor factory in Arizona, bringing its total investment in the country from $12 billion to $40 billion.

Remaining put
Chang previously stated that its Arizona plant would manufacture 3-nanometer chips, the company’s most advanced technology, as advances in chip manufacturing necessitate etching ever-smaller transistors onto silicon wafers.

These announcements worry Taiwan People’s Party politicians like Chiu. He is concerned that the island will lose out as TSMC is courted globally.

According to Chen of CL Securities, national security concerns among governments around the world are driving TSMC’s expansion. He believes, however, that the company will continue to manufacture its most advanced technology in-house.

“This would make economic sense given [the] lower salaries [and] higher quality of Taiwanese engineers,” he said, adding that the company needs Taiwan’s Ministry of Economic Affairs’ approval to move its most advanced technologies abroad, which it is unlikely to grant.

Many experts believe that by the time 3-nanometer chips are manufactured in Arizona, TSMC’s Taiwan operations will have produced even smaller and more advanced chips.

Hutcheson also believes that TSMC will retain its most advanced development teams in Taiwan.

“When you have a group of people working on development, they work very closely together.” You don’t want to mess with that. “It’s not an easy task,” he admitted.