Arizona’s economic relationship with Taiwan is growing. Taiwan-based Gudeng just opened a semiconductor facility in Glendale, AZ, and Taiwanese leaders recently cut the ribbon on the Taipei Economic and Cultural Office in Phoenix.
As the Grand Canyon state moves to strengthen trade relations, China has warned Governor Hobbs about fostering "political ties” with the island, highlighting the diplomatic strains in America’s microchip supply chain. As artificial intelligence drives demand for chips, Taiwan's investment in the U.S. offers an opportunity to boost domestic manufacturing and strengthen our supply chain. Foreign direct investment (FDI) from firms like TSMC and Gudeng helps diversify production, acquire technical expertise, and aid innovation.
Instead of succumbing to political pressure, we should welcome investment from our trusted partners that will reinforce America’s industrial base.
It is never wise to put all your eggs in one basket. Trading partners investing in U.S. production can bring manufacturing closer to U.S. customers and reduce dependence on a limited number of suppliers. Depending exclusively on domestic or foreign production can create multiple logistical problems. Relying too heavily on either domestic or foreign sourcing can leave businesses vulnerable to logistical disruptions.
Increasing local manufacturing can ease bottlenecks. If demand exceeds output, backlogged orders will deplete remaining inventory. FDI can diversify sourcing by increasing local capacity and building a national supply.
Expanding the procurement network gives businesses alternatives when the supply is unexpectedly interrupted. Pandemics, political events, and natural disasters can disrupt the flow of goods. Having multiple producers in geographically diverse locations reduces dependence on a single facility or region and limits supply chain disruption, allowing businesses to shift to another supplier.
In recent years, America has faced several microchip supply droughts. In 2021-2022, COVID-19 lockdowns in Asia and a sharp uptick in demand for consumer electronics created a shortage. Soaring demand stifled automobile production, causing a 20% plunge in early 2021 compared with 2020 because car electronics lacked materials. As of 2026, we are facing another source of pressure. The AI boom is consuming roughly 70% of the world’s high-end memory chips.
But Taiwan is looking to the U.S. to increase output. Quanta Computer & Wistron have poured millions into operations in Tennessee and Texas. TSMC invested billions in Arizona facilities and expansion and built strong relationships with local officials. Taiwanese investment and close diplomatic ties are critical to strengthening the supply chain because of their deep industry knowledge and historic comparative advantage in the semiconductor space.
Funding factory construction is only part of the investment. America also needs the human capital, technology, and managerial expertise to guide semiconductor production successfully. That expertise is already arriving in Arizona. TSMC brought over 500 engineers from Taiwan to ramp up operations, bringing decades of experience with them. The seasoned engineers can train American workers, sharing best practices and “tribal knowledge” that training manuals can't easily capture.
The value of the expertise goes beyond the workers themselves. Taiwanese semiconductor firms bring proprietary technology and market strategy that take decades to develop. Part of the partnership brings this industry knowledge and capital stateside, built through years of R&D, including process optimization, yield management, equipment integration, and wafer fabrication automation. Foreign investment beyond monetary funding can give America access to capabilities that would take much longer to develop independently.
FDI provides more than physical and intangible capital; it gives American companies and researchers a foundation to build on. It opens the door to collaborations that drive domestic innovation. For example, ASU and TSMC partnered to find more environmentally sustainable ways to produce microchips. The project examined the greenhouse gases released during production. This allows American researchers to address the environmental challenges of advanced fabrication.
FDI can also create opportunities for American companies to innovate. California-based Cadence Design has collaborated with TSMC to develop and fine-tune tools for designing advanced microchips. Their partnership has helped engineers improve chip performance, applications, and energy-conserving components for artificial intelligence. This demonstrates how U.S. firms build upon Taiwanese expertise to advance semiconductor innovation.
FDI is more than an influx of capital. It can diversify supply chains, bring critical knowledge to American workers, and create chances for innovation. We should welcome investment from our trusted trading partners and not allow diplomatic strains to deter us from these opportunities. Turning away these investments risks weakening our trade relations and the potential to strengthen American manufacturing.
