Please check my affiliated post of “TSMC risks and disadvantages in Taiwan” as well.
Taiwan’s wishful thinking
For a long time, investors in the Taiwan stock market have believed in TSMC moat. After all, it is the single listed company with the largest number of shareholders in the Taiwan stock market, and it is also the listed company with the highest market value in Taiwan.
However, many Taiwanese stock investors who hold TSMC shares start from Taiwan’s standpoint and perspective, and have their own wishful views and insistence. Burying heads in the sand like an ostrich, and acting like a frog in a well, always feeling good about itself, believing that Taiwan is invincible and that the world cannot do without TSMC.
Those who even do not allow or are unwilling to listen to the truth, or cannot tolerate different voices. They often call such negative or different views on TSMC “badmouthing (aka paint a grim picture of)”. If this is true, if a listed company can be so easily “badmouthed” by negative or different opinions, then I advise you not to buy the company’s stocks. According to this logic, should all exchanges around the world cancel short selling trading methods? Stock market regulatory authorities should list short sellers as illegal criminals and arrest and imprison them?
I want to remind investors that Taiwan is not the center of the universe, and the world does not revolve around Taiwan.
Do you think TSMC can withstand the US’s ban on SMIC and Huawei? Nothing is impossible in this world, it’s just a matter of probability. Just like the stock market, anything can happen tomorrow.
Forced to set up factories in US
TSMC (ticker: TSM) is forced to set up a wafer fab in the United States. No one with some industrial knowledge would think that TSMC’s US wafer fab can make money. Please refer to my other two posts “TSMC gets emerging and serious challenges” and “Why is TSMC’s profit margin much greater than competitors?” for a detailed explanation. TSMC already has a wafer fab in the United States, but it has been unable to make money for a long time. If it could make money, TSMC would have gone long ago, and it would still need to be forced.
At first, there was one factory, then two, and recently TSMC confirmed that there will be a third one. It will not be too surprising if there are more factories in the future. For details on how many wafer fabs and packaging and testing plants TSMC has around the world, please see the detailed list in my post of “How many fabs and houses does TSMC have currently and in the future?“
The matter doesn’t stop there. After the wafers are produced, they still have to be shipped back to Taiwan for packaging. Americans are still worried. In August 2023, Taiwanese media reported that the governor of Arizona came to Taiwan in person to put pressure on TSMC, requiring TSMC to build a new semiconductor packaging plant in Arizona. Compared with wafer production, semiconductor packaging is an industry that relies more on manpower. There is no money to be made in wafer production. The packaging factory is located in the United States, which is a bottomless pit for burning money.
Losses at U.S. plants widen
According to TSMC’s 2024 annual report, the loss of TSMC Arizona Corporation, its Arizona subsidiary, will expand from NT$10.925 billion (US$320 million) in 2023 to NT$14.298 billion (US$447 million) in 2024. In comparison, TSMC’s Nanjing plant in China will make a profit of NT$26 billion (US$813 million) in 2024. The gap between the two is quite huge.
TSMC is becoming ASMC and hollowing out Taiwan
On March 3, 2025, at the White House, TSMC chaiman C.C. Wei said that TSMC has invested $65 billion in Arizona and will invest an additional $100 billion in the future, bringing TSMC’s total investment in the United States to $165 billion. In addition to the three semiconductor manufacturing plants in the original investment plan, TSMC promised to build “additional” three semiconductor manufacturing plants, as well as two packaging plants and one “R&D center”, this the largest single foreign direct investment case in U.S. history.
Please note: This is the first time that TSMC has established a research and development center outside of Taiwan, which has caused great doubts in Taiwan, confirming that the Taiwanese people have long believed that the United States is swallowing up TSMC, and the government is gradually succumbing to the United States and turning TSMC into “ASMC”. Moreover, Trump has emphasized at the White House press conference: The United States only wants TSMC’s high-end process.
TSMC is not a central bank that can print its own money. The capital expenditure of an enterprise has a limit. Even though TSMC is making a fortune now, it has invested $100 billion in four years, which is equivalent to $25 billion a year. TSMC Chief Financial Officer and spokesman Huang Renzhao said that capital expenditure in 2025 is estimated to be between US$38 billion and US$42 billion, with a median of US$40 billion. Minus 25 billion from 40 billion, only 15 billion is left. Do you believe that this will not affect TSMC’s previously announced plans, most importantly the many factories and investment projects originally located in Taiwan?
For a long time, there have been voices and Taiwanese criticize within Taiwan that TSMC is expanding its investment in the United States will lead to “TSMC become ASMC and hollow out Taiwan”. TSMC had previously promised that the most advanced semiconductor process would remain in Taiwan, but as the United States advances step by step, the Taiwanese government is unable to protect it. Everyone is watching to see whether TSMC can keep its previous promise.
Seeing the overwhelming voices of Taiwanese people and media questioning whether the total investment of US$165 billion will turn TSMC into “US TSMC”. C. C. Wei and the president were forced to hold a press conference on March 6, 2025 to explain to the public, but the actual effectiveness and whether it can resolve the doubts of the whole people remains to be tested in the future.
On April 29, 2025, Minister of Economic Affairs Kuo Chih-hui admitted in the Legislative Yuan that if TSMC’s six factories in the United States are completed, the supply chain may indeed be relocated overseas in the future, which will happen about 7 or 8 years later.
It is recommended that you refer to my other two articles: “Two long-term threats to TSMC: US and SMIC” and “TSMC gets emerging and serious challenges” for in-depth explanations.
Jeopardizing Taiwan’s foreign exchange reserves
Taiwan’s Central Bank revealed that foreign exchange reserves amounted to US$573.299 billion at the end of June 2024, making Taiwan the sixth largest country in the world in terms of foreign exchange reserves. TSMC has pledged a total of US$165 billion in investments in the United States, accounting for 28.78% of Taiwan’s total foreign exchange reserves. US$573.299 billion is the common asset of all Taiwanese people accumulated over the past 70 years. How can it be squandered at will?
165 billion US dollars is a very scary and huge number. Please note that foreign exchange is an important indicator to measure a country’s national strength. Foreign exchange reserves directly affect a country’s income and expenditure division, exchange rate, trade, financial stability, and even credit rating. Its importance is beyond the imagination of ordinary people.
As Trump said, the amount of TSMC’s investment in the United States is the largest amount of investment by a single company in the history of the United States.
This is not the first time that Trump has helped TSMC to “increase” its investment plan in the United States. Before returning to Washington, D.C. from Mar-a-Lago in Florida, Trump said in a joint interview with reporters on Air Force One that TSMC’s investment in the United States has reached US$200 billion, and TSMC’s investment plan is expected to bring the U.S. market share in the chip market to 35% or even 40%!
Impact Taiwan’s economy
TSMC has invested $100 billion in the United States. Assuming that it increases its investment in the United States by $25 billion per year and reduces its investment in Taiwan by $25 billion per year, it will reduce domestic private investment by about 15%. In terms of employment, TSMC has added 60,000 employees in the past 20 years and employed about 6,000 people last year. If it moves to the United States, it will affect domestic employment.
In terms of housing prices, TSMC’s dividend amount in 2024 is approximately NT$140.6 billion, with each employee receiving an average of NT$2 million. Assuming that NT$2 million is used to buy a house, the transfer will affect subsequent housing prices. Over the past five years, housing prices in Tainan and Kaohsiung have increased by 56% and 53%, respectively, which is higher than the Taiwan average increase of 49%, as well as the 29% and 38% increases in Taipei and New Taipei, respectively.
The most advanced processes move to US?
On March 4, 2025, when Minister of Economic Affairs Chih-hui Kuo was asked by a member of Congress at the Legislative Yuan whether TSMC’s current 2nm and 1.6nm advanced processes would be transferred to the United States for mass production next year, Kuo replied: “2nm and 1.6nm will not be produced in the United States next year.” Please note: Economic Minister Guo Zhihui’s answer is very skillful:
- There is no guarantee whether it will happen after 2027.
- TSMC’s first factory in the United States has already started mass production last year (what CEO C. C. Wei said at the White House on March 3, 2025), using 4 nanometers; the second factory in the United States will not start mass production until 2028.
- What’s more, if he breaks his promise, he may no longer be the Minister of Economy by then. Who will be held accountable then?
- The most advanced manufacturing process may be improved at any time. After 2027, the most advanced process may become 1.2 nanometers or even 1 nanometer. So if 1.2 nanometers or even 1 nanometer is the most advanced process technology at that time, would it be considered a breach of promise if we go to the United States? who should be held responsible?
Investors should be reminded that politicians love playing word games. There are too many examples to list, so just listen but never trust to them. And don’t forget what Trump said at the White House on March 3, 2025: American factories only need the most advanced processes. Who do you think makes the decision?
And don’t forget, on November 7, 2024, the Minister of Economic Affairs, Kuo Chih-hui, himself said: “2nm will still need to be reviewed by the Investment Review Department before it can be exported overseas, but he also admitted that the advanced process will be passed sooner or later.”
In practice, the Investment Review Commission of the Ministry of Economic Affairs can only manage mainland China, which means that there is an N-1 (one generation behind the latest process) regulation for integrated circuit investment in mainland China, but the United States does not have this restriction. The Investment Review Commission can only conduct “written review”, that is, paper work. In practice, it is unable to control the outflow of the most advanced processes. The Ministry of Economic Affairs’ statement is simply “empty talk.” Former Minister of Economic Affairs Yin Qiming also criticized that the Investment Review Commission is just a rubber stamp. Now the government is giving TSMC as a gift, so naturally it can’t play any role.
Because semiconductor manufacturing is currently the only important industry in the world that Taiwan can be proud of, a global leader, and one that holds an actual market monopoly. If TSMC also adopts the most advanced semiconductor process in its six factories in the United States in the future, Taiwan’s only industry to be proud of will become history forever.
According to an interview with Taiwan’s representative to the United States, Yu Dayu, by the Wall Street Journal, which was broadcast on the 18th: Yu Dayu’s words were clearly different from those of the Taiwan government. He said: It is not ruled out that the most advanced chips will be produced in the United States.
Silicon Shield is a propaganda
Many Taiwanese are worried that Taiwan has long been brainwashed by politicians and manipulated with the self-created term “democracy chip” without realizing it, and the self-proclaimed Silicon Shield bargaining chips will gradually be weakened. People in the semiconductor industry are worried that the “Budapest Security Memorandum” signed by Ukraine in 1994 may be repeated.
But the US’s wishful thinking is actually more practical: Even if China occupies Taiwan, the US will not have to worry about the supply of chips affecting itself, because there are already six TSMC’s most advanced chip fabs in the US. Whether it is willing or necessary to send troops, fight for Taiwan, risk going to war with China, the answer is self-explained.
Note: TSMC’s current campus in Arizona has been previously announced by TSMC to accommodate ten wafer fabs in the future without any problems. What Taiwanese investors don’t know is that, except for a few prosperous places, the cost of land in the United States is very low, and there is no shortage of land.
Second Trump administration intensify the pressure
After Trump took office for his second term, he repeatedly and publicly declared that Taiwan had taken away the US chip manufacturing industry, and threatened to impose high tariffs on Taiwan’s chip exports to the United States in order to improve Taiwan’s current monopoly on chip manufacturing.
As expected, in February 2025, the United States asked TSMC to send engineers to Intel’s factory, and the two sides jointly established a wafer factory, which would be operated by TSMC and jointly owned by both parties. This will of course raise commercial and technical concerns and may affect TSMC’s gross profit margin. The US actually put forward three plans: setting up an advanced packaging plant in the US, having TSMC, the US government and a joint venture invest in Intel’s wafer factory, and having Intel take over TSMC’s packaging orders from US customers.
TSMC actually controlled by Americans
Investors should be reminded that although TSMC is nominally registered in Taiwan, pays taxes, most of its factories are in Taiwan, and its engineers are all Taiwanese; however, for a long time, foreign investment in TSMC has exceeded 70%, most of which is American capital. It can be said that Americans have actually controlled TSMC for a long time. TSMC is a listed company. Do you think that if these American investors who hold TSMC shares launch a vote, will they stand on the side of Taiwan or the United States?
Morris Chang himself has repeatedly told foreign media that he is an American citizen (see “TSMC Morris Chang’s controversial words and deeds” for details). How many Americans do you think are in TSMC’s senior management? When Americans become naturalized citizens, they must swear an oath of allegiance to the United States. Smart readers know who these TSMC senior executives with American citizenship will be loyal to when the critical moment comes.
The US wants to take over TSMC
In February 2025, the media revealed TSMC’s former chairman Mark Liu for retiring in 2024. According to a press release from the University of California, Berkeley, Mark Liu officially established the “Technology Competitiveness and Industrial Policy Center” (TCIP) at the university, aiming to enhance the competitiveness of the United States in advanced technology research and development and manufacturing.
Please note that it is the United States, not Taiwan Mark Liu want to improve the advanced technology R&D and manufacturing competitiveness. Think about why TSMC sued Liang Mengsong back then (see “Mong-Song Liang, the hero of SMIC’s breakthrough in US blockade“)? What about Mark Liu? However, he just resigned last year. Mark Liu’s position was chairman, and he knew far more TSMC secrets than Mong-Song Liang. What we call it is the two sets of standards? This is a real example.
TSMC ultimately had no choice but to surrender to the US because it had no bargaining chips at all: its technology was completely controlled by the US, and shareholder voting rights were in the hands of Americans. The Taiwanese government had no ability to help TSMC at all. If the United States takes action like it did to SMIC or the Japanese semiconductor industry in the 1980s, TSMC’s stock price will collapse the next day and all market shares will be reshuffled.
Moreover, by the second quarter of 2025, Japan’s Rapitus, which is supported by the United States, will be able to produce 2-nanometer chips. For details, please see my post of “Rapidus will be TSMC’s strongest rival in the future” What will happen if TSMC doesn’t obey? Need I say more?
Relying on the Taiwan government is get blood out of a stone
In the past decade, the Taiwan government has been very ambiguous about the US’s push hard steadily approach to TSMC. Not only did it succumb to the US’s request to set up factories in the US.
In November 2021, TSMC is required by US government to submit relevant data such as inventory status and customer orders to the US government within a deadline. The Taiwan government actually allows this kind of long-arm jurisdiction, which is a typical violation of a country’s sovereignty.
Investors think I am talking nonsense or worrying too much, but what about the CEO of AUO and senior executives of Chimei Incorporated who were found to have monopolized by a U.S. court, and AUO Vice Chairman Chen Xuanbin was jailed for 2,343 days and Chimei Incorporated CEO He Zhaoyang was jailed for fourteen months? It was only 14 years ago. Have you all forgotten what I mentioned in my post of “The evil US, How did Japan, Alstom, Toshiba, HTC and Taiwan’s panel industry collapse ?“
China can mobilize the whole country to successfully save Meng Wanzhou from being detained. Huawei spent four years building a completely local de-Americanize semiconductor supply chain in China to prove to the United States that it could produce 7-nanometer and 5-nanometer chips on its own without TSMC under US supervision, despite the comprehensive embargo imposed by the United States and its allies. Striking back and returning again to beat Apple and making the world’s first smartphone with satellite communication capabilities. Can Taiwan do this? Do Taiwanese have such ambition? Do Taiwanese dare to do this?
The case of Japan’s semiconductor industry
In the 1980s, Japan’s semiconductor industry beat the United States so hard that the United States forced Japan to sign the humiliating and unequal agreement “US-Japan Semiconductor Agreement”, which made Japan’s semiconductor manufacturing industry go from being the world’s number one to having almost no visibility and voice today. But from another perspective, it was precisely because the United States wanted to suppress Japan’s semiconductor industry in the 1980s that TSMC was given the opportunity to take advantage.
Note: Both TSMC and Samsung Semiconductor were established the year after the signing of the US-Japan Semiconductor Agreement. This is not a coincodance.
There are already many detailed discussion articles in my blog on this part, so I will not repeat them here. You are welcome to read some of my related posts: “Japan is already a country of mediocrity, not as advanced as you think“, “The evil US, How did Japan, Alstom, Toshiba, HTC and Taiwan’s panel industry collapse ?“, “Rapidus will be TSMC’s strongest rival in the future“
Huawei’s case
Before Trump imposed a comprehensive ban on Huawei’s smartphones and instigated Canada to detain Huawei’s CFO Meng Wanzhou, Huawei’s smartphones were the runner-up in global smartphone sales and TSMC’s second largest single customer after Apple. At the end of 2019, Huawei accounted for about 13% to 15% of TSMC’s revenue, while Apple accounted for about 20% at the time. However, after being banned by the United States and its inventory of mobile phone processors was exhausted, Huawei’s market share in Western Europe shrank sharply from 20% in the same period of 2019 to 8.8% in the third quarter of 2020.
Note: According to reports from market research firms Strategy Analytics, Counterpoint Research and Canalys, Huawei’s smartphone shipments in 2019 exceeded Apple’s, making Huawei the world’s second largest mobile phone supplier. Data shows that Huawei’s smartphone shipments in 2019 were about 240 million units, Apple’s shipments were slightly less than 200 million units, and Samsung retained first place with 300 million units.
With the help of SMIC’s self-made 7nm chip process, Huawei has spent nearly four years building a fully localized semiconductor supply chain with zero US presence. In the first week of October 2023, Huawei phones surpassed Apple for the first time in China to become the market leader after being banned. In October 2024, after 46 months, Huawei’s mobile phone sales in China once again surpassed Apple.
Note: According to a report released by Counterpoint Research, the global high-end smartphone market with a wholesale price of more than US$600 will increase by 6% year-on-year in 2023, setting a new record. Among them, Apple took the lead with a market share of over 70%, Samsung ranked second with 17%, and Huawei returned to third with a global market share of 5%.
For more details about Huawei, a very important company, please see my other post, and you will understand why the United States hates it so much and is eager to get rid of it as soon as possible: “How does the all-powerful Huawei make money?“
SMIC case
Please read “How is SMIC after US embargo?” You will know that after being completely embargoed by the United States, they still survived and are living well. The current situation of SMIC.
In short, SMIC continues to fight back and has proven that it can produce 7nm without EUV, with a yield rate of 40% that can make a profit and is heading towards 60%.
Not only that, SMIC has previously disclosed that the 5nm process has already been successfully pilot-produced.
Stock price performance recently
Recently, I saw a certain financial media in Taiwan summarize the performance of the US stock market yesterday. The headline was roughly that the US stock market closed higher yesterday because TSMC led the Philadelphia Semiconductor Index. However, TSMC only rose 0.89% that day, while most of the well-known companies that are components of the Philadelphia Semiconductor Index rose by more than 2%, and almost every one of them rose far more than TSMC. It is ok that this kind of product placement technique or propaganda is habitually used in Taiwan, but it is really shaking to use it to such an extent that it deviates from the facts. I wonder where is the fairness and objectivity of the media?
The past three days have been national holidays in Taiwan, while U.S. stocks are experiencing their biggest turmoil since President Trump took office. On February 27, 2025, TSMC’s US ADR fell 7%. From the highest point on January 22, 2025 to February 28, 2025, TSMC’s US ADR has collapsed by more than 20% in five weeks.
Share price cannot tell lie.
Closing words
A man swealth is his own ruin by causing other’s greed. For TSMC , it maybe.
Anyone who believes that TSMC has a strong corporate moat or competitiveness is a day dreamer. Once the United States takes action, investors will know whether TSMC has a wide enough corporate moat or competitiveness.
Supporting factors? Aren’t Japan’s semiconductor industry and Huawei enough?
In my first book, “The Rules of Super Growth Stocks Investing“, I emphasized that government regulation or governance have an extremely important impact on companies. They can cause an industry to disappear in an instant and can also cause a company to go bankrupt immediately.
Geopolitics and the competition between China and the United States, to put it bluntly, are the government regulations and governance that are happening now. Huawei has experienced a catastrophic disaster that almost wiped it out, but it survived.
Especially the Taiwanese. What the United States is eyeing now is Taiwan’s only valuable and competitive industry that the entire Taiwanese have invested countless resources in over several generations and are worthy of pride. People have already violated Taiwan’s national sovereignty and have already bitten off everything, yet they are still dreaming and trying to cover up their inaction.
There are still countless Taiwanese people, including the Taiwanese government and politicians who always say “I love Taiwan”, who always have two sets of standards. They automatically kneel down when they meet the United States and Japan. They do not know how to cherish TSMC, which was created by the hard work of the previous generation. They have no ability or negotiation strategy, and they have gradually given it to the United States and Japan bit by bit, treating the people as fools. They are still using the policy of keeping the people ignorant from half a century ago, and are still making up excuses for the United States to whitewash the Americans’ desire to annex TSMC.
As for TSMC’s future? No need to argue here; let’s wait and see.
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