This article is archived. For updated research and insights, please visit our new site Small Island Research Notes on Tech and Future.
The transformation of the semiconductor industry under the ‘America First’ policy.
In the global semiconductor industry’s development, the implementation of the U.S. “America First” policy has led governments to increase support for their local semiconductor industries. As a result, the global semiconductor industry is entering an era of regionalized development. This shift will disrupt the previous model of global collaboration, introducing challenges related to geopolitics and economic structures. It will also accelerate regionalization, alter regional competition, and give rise to three major camps and an “internal circulation” model. Taiwan’s semiconductor industry, particularly TSMC, faces multiple challenges. On one hand, it must navigate increasing policy pressures from various countries, and on the other, it needs to maintain a delicate balance between global competition and cooperation to preserve its leadership in technology and market.
According to a Reuters report, under the “America First” policy, the Trump administration shifted its stance on the semiconductor industry and is considering adjustments to the CHIPS Act, including changes to incentive conditions or terms, to further promote domestic semiconductor manufacturing.
Our Perspective
With the implementation of the U.S. “America First” policy, the U.S. government has shown increasing concern for the semiconductor supply chain, especially regarding the revitalization of domestic manufacturing. This policy has created challenges for the global semiconductor industry and, under the influence of geopolitics and economic structures, has broken the previous global collaborative model, shifting toward regional development. How this change will affect the future of the semiconductor industry is a topic we will explore below.
1. Acceleration of Semiconductor Regionalization
In the past, the semiconductor industry was centered on globalization, with highly divided roles in design, manufacturing, and packaging. However, with the U.S. increasing support for its domestic semiconductor industry, China promoting the development of its semiconductor technology, and Europe pushing forward the European Chips Act to support local industry, regional development is now accelerating. This shift will disrupt the global division of labor, and semiconductor industries in different regions will form independent ecosystems, reducing global collaboration to some extent.
2. Changes in Regional Competition
As the semiconductor industry regionalizes, competition among regions will intensify and may take on new forms.
2-1. Widening technology gaps
The U.S. and its allies (such as Taiwan, South Korea, Japan, and Europe) will continue to lead in advanced process technologies, particularly in high-end semiconductor products. China will speed up the development of domestic technologies. While its technology may lag in the short term, government initiatives (such as the “Made in China 2025” plan) will help drive growth in China’s semiconductor market. Europe has strong technology but lacks large-scale foundries, and will face many challenges in the future.
2-2. Rising supply chain costs
In regionalized supply chains, each region will need to reinvest in and independently develop core technologies, which will increase overall costs and raise product prices, slowing down innovation.
2-3. Expanding geopolitical risks
As supply chains become more regionalized, the semiconductor industry will increasingly depend on political factors.
3. Future Development of the Semiconductor Industry
If the trend toward regionalization continues, several possible future scenarios for the semiconductor industry include:
3-1. Accelerating the formation of three major semiconductor camps
The global semiconductor industry will likely split into (1) the U.S. and its allies (Taiwan, South Korea, Japan, Europe), forming tight cooperation in semiconductor manufacturing and technology R&D; (2) China, which aims to produce its own semiconductors while facing U.S. technological restrictions; and (3) Southeast Asia/India, emerging as new semiconductor manufacturing hubs to attract more foreign investment. These three camps will compete fiercely in terms of technology, capacity, and market.
3-2. The rise of an “internal circulation” model
Regionalization policies will lead to more closed semiconductor supply chains in various countries. For instance, the U.S. CHIPS Act aims to bring semiconductor manufacturing back home, China’s “Made in China 2025” plan focuses on strengthening its domestic supply chain, and the EU’s European Chips Act promotes local technological development.
3-3. Changes in Taiwan’s semiconductor industry role
With the “America First” policy, Taiwan’s semiconductor industry, particularly TSMC, is facing increasing challenges. TSMC must not only be a global semiconductor manufacturer but also a key hub for global cooperation and competition. Under growing global political pressure, TSMC needs to expand its production facilities worldwide, strengthen international cooperation, and reduce dependence on any single market. At the same time, maintaining technological leadership, preventing key technology leakage, and balancing innovation with protection will become core challenges.
Overall, if the “America First” policy continues, the global semiconductor industry will enter a more regionalized competitive landscape. This will lead to intense competition in technology, capacity, and market, possibly reshaping the global semiconductor ecosystem. Competition between countries and regions will decentralize supply chains, raise supply chain costs, and potentially hinder technological innovation, especially when different regions try to establish independent, self-sufficient supply chains. Additionally, the intensifying geopolitical risks will force semiconductor companies to deal with more complex political and economic environments.
Nonetheless, regionalization will also stimulate the development of emerging markets and local markets, creating new business opportunities. For semiconductor companies, this is not just a challenge but an opportunity for innovation. As different regions strengthen their manufacturing capabilities, local market demand will surge, and companies that can establish a solid foundation in these markets will gain more opportunities. Furthermore, with the restructuring of the global semiconductor supply chain, companies that can leverage flexible production layouts and regional technical advantages will be more competitive in this intense environment. Therefore, companies that quickly adapt to regionalization will mitigate risks and find opportunities for growth and expansion.
Ultimately, how Taiwan’s semiconductor industry, particularly TSMC, finds a delicate balance between global competition and cooperation will determine whether the semiconductor industry can maintain its leadership. As a leader, TSMC must find a sustainable path between responding to policy pressures from governments, maintaining technological leadership and innovation advantages, and building stable relationships with global partners. Especially in the face of fierce competition from countries like the U.S. and China, as well as the rise of regionalized supply chains, how TSMC maintains its technological edge in global semiconductor manufacturing while strengthening cooperation with different regions will determine whether it can continue to lead the global market and effectively navigate geopolitical risks in the future.
This article is part of our Global Business Dynamics series.
It explores how companies, industries, and ecosystems are responding to global forces such as supply chain shifts, geopolitical changes, cross-border strategies, and market realignments.