President Trump’s threat to use steep tariffs to break up what critics say is a virtual monopoly on the production of advanced microchips could become a reality in a matter of days, while Taipei has dispatched a high-powered economic delegation to Washington this week in a bid to convince the administration to change course.

Mr. Trump recently said he could put tariffs of up to 100% on semiconductor chips — the kinds that power today’s smartphones and are indispensable for market-leading companies such as Apple, Nvidia and others — made by the Taiwan Semiconductor Manufacturing Co. (TSMC). The Taiwan-based company, critics say, essentially now enjoys a monopoly over the global microchip market, with about 90% of global leading-edge semiconductor chip production now concentrated in the island democracy.

Specialists say that’s a significant national security problem for the U.S. for multiple reasons, including the fact that TSMC operates some facilities in mainland China. And in the event of a military strike by China’s communist leaders on Taiwan, they say, the global supply chain for high-end, cutting-edge chips would be severely disrupted, putting at great risk America’s technological and military power.

Taken together, all of those factors have given TSMC a remarkable and unique amount of control over the crucial 21st-century industry.

“At this point, due to its market share dominance of high-end chips, TSMC is a de facto international monopoly with no U.S. counterpart to match its size and scope of production,” Andy Keiser, senior adviser to the National Security Institute at George Mason University, wrote in a recent analysis.

“TSMC also operates manufacturing facilities in mainland China. This exposes them to forced technology transfer to Chinese entities, IP theft and even sabotage,” he wrote in a recent piece posted on Realclearpolicy.com “Even if manufactured outside of Taiwan or China, the chip’s intellectual property and likely the fabs’ operational capability is still directly tied to Taiwan.”

TSMC declined to comment when contacted by The Washington Times. 

Taiwan’s government has backed development of the semiconductor industry since the mid-1970s, providing about half of the initial $200 million in start-up funding for TSMC.

100% tariffs coming?

Mr. Trump and other high-ranking administration officials have raised serious national security concerns about TSMC’s market dominance. The president has threatened to slap tariffs of up to 100% on Taiwanese chips as part of his broader tariff plan targeting goods from abroad.

But Mr. Trump has also expressed deep reservations about moves, made under the Biden administration, to bring some TSMC production to American shores. The Biden administration policy called for a $6.6 billion incentive for TSMC to build an advanced semiconductor fabrication plant in Arizona. Last month, the plant reportedly began producing four-nanometer chips for U.S. customers.

But Mr. Trump has made clear that he opposes subsidizing TSMC’s U.S. operations. He laid out his thinking on the matter in a Jan. 27 speech to congressional Republicans. He blasted the 2022 CHIPS and Science Act, the bipartisan law that called for major new investments in U.S. chipmaking and laid the groundwork for TSMC’s investment in Arizona.

“In particular, in the very near future, we’re going to be placing tariffs on foreign production of computer chips, semiconductors and pharmaceuticals to return production of these essential goods to the United States,” Mr. Trump said in his address.

“They left us and went to Taiwan,” Mr. Trump said. “And we don’t want to give them billions of dollars like this ridiculous program that Biden has given everybody billions of dollars. They already have billions of dollars. They’ve got nothing but money. … They didn’t need money. They needed an incentive. And the incentive is going to be they’re not going to want to pay a 25, 50 or even a 100% tax.”

Howard Lutnick, Mr. Trump’s pick to head the Commerce Department, told a Senate confirmation hearing last month that U.S. firms are “too reliant on Taiwan.” he said.

“We need to have . . . that production” in the U.S., Mr. Lutnick told lawmakers.

Well aware of the looming moves, Taiwan’s Ministry of Economic Affairs sent two top officials to Washington this week to meet with Trump administration officials, according to the news site Focus Taiwan.

Economics Minister Kuo Jyh-hue said the visit is aimed at making clear to the U.S. that Taiwan did not steal U.S. technology or otherwise snatch the chips manufacturing business from American shores.

“We paid for all intellectual property,” Mr. Kuo said, according to the news site. “Taiwan is the United States’ best partner.”

Some leading national security insiders also point out that, regardless of the Trump administration’s broader policy aims, making major changes to the global semiconductor chip business is an exceedingly difficult operation and will take years.

“Semiconductors [are] an unbelievably complicated business,” said Anja Manuel, executive director of the Aspen Strategy Group and the Aspen Security Forum. “The United States absolutely leads in design of chips and we lead … on creating the machines that make the chips. We are not as good at the fabs, which is actual manufacturing of the chips, because that was considered low margin. Our companies didn’t want to do it.”

“So, mostly they get designed here, the chips get made in Taiwan — famously by TSMC, they’re the best in the world — … and then they get put in all of the electronics that are in our pockets all over the world,” she told Threat Status in an exclusive video interview recently. “Undoing that ecosystem and bringing all of it back to homegrown American companies here, I think, is unfeasible in the short and medium terms. So that’s a long way of saying we really should be partnering with TSMC. There’s no problem with that.”

Many analysts see Mr. Trump’s tariff threat as a way to force TSMC to boost its investments inside the U.S., as actually applying the import duties would have severe consequences for the American firms dependent on TSMC chips. U.S. companies, they argue, would end up having to pay virtually all of the tariff surcharge if Mr. Trump went through with his plan.

“TSMC’s chips cannot be easily replaced, even Intel struggles to produce them,” Darson Chiu, an economics professor at Taichung-based Tunghai University and director-general of the Taipei-based Confederation of Asia-Pacific Chambers of Commerce and Industry, recently told the Taiwan Times.

National security implications

What could be a problem, other analysts contend, is a Chinese military move on Taiwan. Beijing considers Taiwan part of its sovereign territory and President Xi Jinping has reportedly ordered China’s commanders to be prepared for military action as soon as 2027 against the island.

“It’s not a matter of if China acts, but when. Whether military action, technological warfare and sabotage, or a combination of both, such aggression would inevitably disrupt, if not sever, the U.S. semiconductor supply chain,” said Aiden Buzzetti, president of the nonprofit advocacy group the Bull Moose Project.

“It’s time policymakers get tough and hold TSMC accountable to the geopolitical situation. Fortunately, President Trump has the chops to do it,” he wrote in a recent piece for The Blaze. “He has been vocal about using tariffs to stop the flood of foreign-made chips and support U.S.-based manufacturers.”

There is also deep concern about the access Beijing has to the U.S. technology at facilities in Taiwan.

“TSMC’s most significant and technologically advanced capabilities (e.g., 2-3 nanometer fabrication) are in Taiwan,” according to a 2023 Congressional Research Service report, which warned that China appears to be fabricating such advanced semiconductors at TSMC in Taiwan.

“Many [Chinese] firms and institutes — including some that are listed on the U.S. Department of Commerce’s Bureau of Industry Security’s Entity List — appear to be using membership in U.S. open-source technology platforms to access the U.S. technology and capabilities to design advanced semiconductor chips that they can then fabricate in Taiwan,” the report said.

The situation has prompted concern among some U.S. officials. Reuters reported last November that the Commerce Department had ordered TSMC to halt shipments of advanced chips to companies in China, chips that are often used in advanced artificial intelligence applications.

TSMC appears to have cooperated with U.S. officials on the matter. Reuters maintained that Commerce officials had issued their order after TSMC had notified the department that a chip fabricated by the company had been found in an AI processor maintained by Huawei, the China-owned telecom giant that is on the U.S. restricted trade list.

A spokesperson for TSMC told the news agency at the time that the company is “law-abiding” and “committed to complying with all applicable rules and regulations, including applicable export controls.”

The Commerce Department had previously moved 2022 to restrict U.S. semiconductor design and American manufacturing companies Nvidia and AMD from exporting AI-related microchips to China, although there have been no reports of those companies’ chips turning up in Huawei processors. The department also issued restrictions on Intel and Qualcomm, two other key players in the U.S. chip sector.

• Guy Taylor and Bill Gertz contributed to this report.

• Ben Wolfgang can be reached at bwolfgang@washingtontimes.com.