The people of Arizona have barely opened their eyes to the fact that the island nation of Taiwan is building a kind of bridge across the Pacific Ocean, over the Big Tech enclaves of San Francisco and Silicon Valley, and straight to the Arizona desert.

TSMC or Taiwan Semiconductor Manufacturing Co. is the most important corporation in Taiwan and key to the survival of that island nation.

It is also arguably the most important corporation in the world — an easy argument to make.

At $550 billion market cap, TSMC is only the 11th most valuable company in the world, but it has cornered the market in manufacturing the most advanced semiconductors — the nerve center of our computers, phones, cars, medical and industrial equipment, jet aircraft and carrier fleets.

The rest of the world drools over TSMC

Semiconductors are highly intricate devices that power the global economy today and will do so into the foreseeable future. They are essential to the rapidly emerging technology of artificial intelligence.

The entire world — Europe, the United States, the Asian Pacific, Latin America — drools at the product that TSMC almost alone makes and would love the Taiwan firm to set up shop in their own neighborhoods.

TSMC’s biggest play beyond east Asia is the $165 billion it ultimately plans to invest in production plants in metro Phoenix that will supply microchips to companies like Apple, Google, Qualcomm, Nvidia and many others.

Their investment in our state would be the largest direct foreign investment in American history.

What does that mean for Arizona?

For starters, it means 40,000 more construction jobs in the next four years in metro Phoenix. It means six cutting edge factories humming away in the Sonoran desert at build-out.

But it could also mean much more.

TSMC is not just about jobs for Arizona

When Taiwan President Lai Ching-te hosted Arizona Gov. Katie Hobbs and her delegation in Taipei last week, he noted that Arizona was becoming a “shining example” of “non-red supply lines.”

What he meant was that TSMC is building factories in Arizona that are beyond the reach of the People’s Republic of China, the communist power that is threatening to conquer and absorb Taiwan — the island nation China claims as its own.

Should that happen — and the possibility grows by the day — Western economies would be cut off from the largest supply of the most advanced semiconductors.

President Lai also noted that today there are 30,000 Taiwanese living in Arizona — a number that is almost certain to grow as TSMC puts in play its additional $100 billion investment in our state.

What this means is that TSMC is far more than a business investment in Arizona. As a sovereign people who face an existential threat, the Taiwanese could at any moment awaken to an invasion or blockade of their island.

China's invasion of Taiwan is already on

In fact, to think of the possible invasion of Taiwan is to frame the question incorrectly, Josh Rogin, the Washington Post’s Global Opinion columnist, said.

“China is already invading Taiwan in every way except for militarily,” Rogin told the Dec. 16 Dispatch Podcast. “They are using economic coercion, information warfare, cyber-warfare, political interference and literally blockading the country on a random basis, threatening them, shooting missiles over them, attacking their diplomatic stature, keeping them out of international organizations that they need to be in, and overall, just trying to make their lives miserable on a daily basis. And that is a strategy that Beijing is using to strangle the country, like a Boa constrictor.”

It doesn’t take much imagination to know what happens if the Chinese act on their threat and absorb Taiwan, and what that could mean for Arizona.

We already have a living example — Hong Kong.

When the British government handed over the city of Hong Kong to the Chinese in 1997, that colonial enclave had grown into one of the most productive and dynamic cities in the world, a leader in world finance.

Under the Sino-British Joint Declaration of 1984, China was supposed to provide Hong Kong special autonomy under “one country, two systems.”

Take a page from Hong Kong's brain drain

But China has largely reneged on that agreement, the Council on Foreign Relations reports.

“Hong Kongers are supposed to be guaranteed freedoms of the press, expression, assembly, and religion, as well as protections under international law. ... But in practice, Beijing has curtailed most of these rights.”

In the years just before the Chinese takeover (1987-1996), some 503,800 people left Hong Kong. Because the city was still part of the British Commonwealth, many of its people migrated to other Commonwealth nations such as the U.K., Canada and Australia.

They did so again when the Chinese government provoked another mass exodus in 2020 with a new security law that suppressed speech and protest in the city. From 2020 to 2022, the labor force in Hong Kong shrunk by 140,000 people, according to the Migration Policy Institute.

Many of those emigrants were high-degree, high-skilled people who took their wealth with them — according to one Bank of America estimate, some $76 billion.

On the receiving end, those Commonwealth nations created “lifeboats” to help the Hongkongers with special visa privileges, welcoming committees, and information on jobs and housing.

Something we in Arizona can all study closely as we begin to build our own lifeboat for a people whose island home could soon be snatched from them.

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Why Semiconductor Stocks Like Taiwan Semiconductor Manufacturing, Advanced Micro Devices, and Monolithic Power Rallied

Shares of semiconductor heavyweights Taiwan Semiconductor Manufacturing (NYSE: TSM), Advanced Micro Devices (NASDAQ: AMD), and Monolithic Power Systems (NASDAQ: MPWR) were rallying today, up 2.7%, 7.4%, and 6%, respectively, as of 2:21 p.m. ET.

The across-the-board gains were likely in response to reports the Trump administration may grant a reprieve from upcoming April 2 tariffs to semiconductors, as well as other "strategic" industrial sectors.

Trump partially backs down

According to "people familiar with the matter" and reported first by Bloomberg, the Trump administration plans to omit the sector-specific tariffs it had been considering on automobiles, semiconductors, and pharmaceuticals, as part of the upcoming April 2 tariffs. Those sectors were originally included along with 25% tariffs on major trading partners Mexico and Canada.

However, likely in response to conversations with industry CEOs, the April 2 tariffs will now apparently only include "reciprocal" tariffs on certain trading partners that also have existing tariffs on U.S. goods and/or large trade imbalances. The status of the prior sector-specific tariffs and the Canada/Mexico tariffs is still uncertain. As of now, it appears the White House will apply tariffs to the 15% or so of trading partners with particularly high trade imbalances with the U.S., while other countries could be hit with smaller tariffs of an unspecified number.

A reprieve from tariffs would benefit most semiconductor companies, as the vast majority of chips are manufactured in Taiwan or other East Asian countries today. While both the Biden and Trump administrations have taken steps to initiate more investment in chip manufacturing in the U.S., these large chip fabs take a long time to build, and will likely be more expensive than semiconductor manufacturing sites in Asia, especially Taiwan.

Even though TSMC recently committed to spending $100 billion in the U.S., the vast majority of its manufacturing remains in Taiwan, and it was unclear if the announcement would exempt the company from future tariffs. It's also unclear if Taiwan would ever let its most advanced process node be produced in the U.S. first.

Additionally, AMD makes its leading-edge CPUs and data center GPUs at TSMC in Taiwan today, so it would have also been heavily affected by potential tariffs on semiconductors. And Monolithic Power Systems makes its chips at a variety of manufacturing fabs in China, Taiwan, South Korea, and Singapore. While the new 20% tariffs on China should remain, it's possible Monolithic's chips made in those other countries would get a reprieve for now.

Don't pop the champagne just yet

While today offered a nice relief rally for chip stocks, it may be too early to celebrate. First, the scope of the upcoming tariffs on April 2 are still a bit unclear, as the administration appears to be going back and forth with tariffs and exemptions on a number of products and countries. In addition, even if semiconductors are exempted from tariffs on that date, there will still be a lot of extra duties going on several products across a large number of trading partners.

In the short term, this could raise prices to consumers, slow economic activity and investment plans, or both. Should the economy react negatively to the tariffs more broadly, that could impede the growth of semiconductors generally, which tend to be cyclical. Even the red-hot AI sector could slow down a bit, as more and more big AI spenders are beginning to focus on returns on all that AI investment.

Therefore, investors shouldn't read too much into this one day in terms of having a short-term "all clear." Those investing in chip stocks today should maintain a longer-term view of the benefits of AI, electrification, and other long-term industry drivers. It's really hard to know if today's reprieve marks a near-term bottom, or if more volatility might still be ahead.

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