Introduction

In a remarkable shift within the global semiconductor landscape, Taiwanese firms, led by Taiwan Semiconductor Manufacturing Company (TSMC), have made unprecedented investments in the United States and Japan during 2024, while expenditures in China have stagnated. This trend underscores the widening technological rift and escalating tensions between the US and China, as well as between Taiwan and mainland China.

Investment Figures

According to calculations by Bloomberg News based on a statement from Taiwan's Ministry of Economic Affairs, investments flowing into the US reached a staggering US$14.1 billion (approximately S$19.3 billion) this year. This boost helped elevate total Taiwanese foreign direct investment to an impressive US$48.6 billion, marking record levels in both metrics.

TSMC's Overseas Expansions

Notably, TSMC’s overseas expansions, including its significant facility under construction in Arizona, have been central to this investment surge. The increase in capital allocation also extended to Japan, Canada, and Singapore, which saw their investment figures climb to unprecedented heights. In stark contrast, Taiwanese investments into China reached only US$3.65 billion, accounting for a meager 7.5% of the total overseas expenditure—this is the lowest share recorded since 1991.

Geopolitical Context

This investment pivot reflects not only an adaptation to ongoing geopolitical challenges but also a response to Biden administration efforts to revitalize American chip manufacturing. The US government has been offering substantial financial incentives like grants and loans to companies, including TSMC, to encourage them to set up operations domestically.

Rising Tensions with China

Additionally, amid rising tensions with China, particularly after President Lai Ching-te's ascension to leadership in May 2024, Taiwanese companies are seeking to mitigate risks associated with potential tariffs from the incoming administration of President-elect Donald Trump. Relations between China and Taiwan have continued to deteriorate, with Beijing conducting unprecedented military exercises around Taiwan, viewing Lai as a threat to its reunification objectives.

TSMC's Profit Surge

Meanwhile, TSMC has reported a tremendous 57% increase in profit for the fourth quarter of 2024, fueled by soaring demand for advanced chips essential for artificial intelligence applications. The company, renowned as the world's largest contract chipmaker and a key supplier to giants like Apple and Nvidia, achieved a record net profit of NT$374.68 billion (around S$15.6 billion) for the final three months of the year, the highest quarterly profit ever recorded.

Challenges Ahead

However, TSMC is navigating challenges posed by US technology restrictions targeting China, coupled with the uncertainty regarding possible tariffs under Trump's administration. Recently, the US government announced further restrictions on AI chip and technology exports, aiming to reinforce its technological supremacy over Beijing. In a related move, an executive order was put forth, allowing federal land to be leased to companies that commit to establishing vast AI data centers, further lamenting the tech divide between Washington and Beijing.

Conclusion

As the global semiconductor market shifts, all eyes are now on how companies like TSMC will adapt to these changing dynamics and leverage opportunities presented by the increasing demand for advanced technology. Will this new trajectory signify a long-lasting transformation in global supply chains? The coming months are set to reveal the full implications of these investment patterns.