Taiwan Hints US-Like Relations with EU May Spur Chip Plants

Taiwan hinted that closer ties with the EU, on par with those it enjoys with the US, may prompt its semiconductor giants to invest more in the bloc.

Taiwan wants to have the kind of trade, technology and economic ties with the EU that it has with the United States, Taiwan Deputy Economy Minister Chen Chern-chyi said late on Monday.

“Our interactions with the United States have been rather more, communication is closer,” he said. “We also hope to develop the same close relationship with the EU. If it’s like this, it would be very helpful for our companies for their attention towards and knowledge of Europe.”

Taiwan’s TSMC, the world’s biggest chipmaker, is building a $12 billion factory in the United States, while GlobalWafers, another Taiwan chip giant, plans a $5 billion plant.

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Pivotal Role in Chip Production

With tensions between Taiwan and China mounting in recent years, TSMC’s pivotal role in the global semiconductor supply chain has emerged as one of the gravest risks to the global economy. That has left western nations and TSMC grappling with how to mitigate a worst-case scenario in which China invades or blockades Taiwan, cutting off a supply of chips that are crucial to the rest of the world.

The tension has seen a slew of plans for semiconductor plants in western nations, including Japan, where TSMC is building a new chip plant with Sony Group and Denso. The chip giant has also been looking at building a factory in Germany, although it said last year it would focus on other clients first.

Analysts say that navigating a transition away from production heavily concentrated in Taiwan is a delicate balancing act. If plants are moved out too quickly or if too much pressure is applied on TSMC to create a supply chain that excludes China, it could cause “serious friction’’ with Beijing.

EU Investment Deal Sought

In the face of sustained Chinese pressure aimed at forcing Taiwan to accept China’s sovereignty claims, Taipei has been keen to bolster ties with other democracies even in the absence of formal diplomatic relations.

It has been pushing for a bilateral investment agreement with the EU, and while the two sides held high-level trade talks last month, progress to date has been limited.

The EU has been keen to encourage Taiwan’s chipmakers to become partners under the European Chips Act, announced in February to resolve its chip shortages, but European leaders are now preoccupied by the war in Ukraine and the threat of an energy crisis.

In a minor setback for the two sides’ ambitions, GlobalWafers failed in February in a 4.35 billion euro ($4.36 billion) takeover attempt of German chip supplier Siltronic.

But Chen, whose portfolio covers economic ties with Europe, said Taipei was open to its chip producers setting up factories there.

“We even hope to have a free-trade agreement with the EU, which would be the best. The EU has lots of FTAs with other countries, and if the EU is willing, we are too,” he said.