Taiwan Seeks Strategic AI Partnership with the US Amid Tariff Deal

Taiwan's Strategic AI Partnership with the US

By Wen-Yee Lee and Ben Blanchard

TAIPEI, Jan 16 (Reuters) - Taiwan aims to become a close strategic partner with the United States in the area of artificial intelligence (AI) after striking a deal to cut tariffs and boost its investment in the country, Vice Premier Cheng Li-chiun said on Friday.

The administration of President Donald Trump has pushed the major producer of semiconductors for greater investment in the United States, specifically in turning out chips that power AI.

Details of the Tariff Deal

"In this negotiation, we promoted two-way Taiwan–U.S. high-tech investment, hoping that in the future we can become close AI strategic partners," Cheng said in comments livestreamed from a press conference in Washington.

Investment Plans and Economic Impact

Cheng led the talks that clinched Thursday's trade deal, which cuts tariffs on many of Taiwan's exports, and directs new investments in the U.S. technology industry, but it could also irritate China.

China regards democratically-ruled Taiwan as its own territory and strongly objects to high-level U.S.-Taiwan exchanges. Taiwan rejects Beijing's sovereignty claims.

U.S. Commerce Secretary Howard Lutnick said Taiwan companies would invest $250 billion to boost production of semiconductors, energy and artificial intelligence in the United States.

The figure includes $100 billion already committed by chipmaker TSMC in 2025, with more to come, he added. 

Taiwan will also guarantee an additional $250 billion in credit to facilitate further investment, the Trump administration said.

'CLOSE PARTNERS'

Cheng called the deal "win-win", adding that it would also encourage U.S. investment in Taiwan. The United States is the island's most important international backer and arms supplier, despite the lack of formal diplomatic ties.

The investment plan is company-led, rather than driven by the government, and Taiwan companies will continue to invest at home, Cheng added.

"We believe this supply-chain cooperation is not 'move,' but 'build.' We expand our footprint in the U.S. and support the U.S. in building local supply chains, but even more so, it is an extension and expansion of Taiwan's technology industry."

Investments would also cover AI servers and energy, Taiwan Economy Minister Kung Ming-hsin told reporters in Taipei, adding that it was up to companies to reveal the chip-related amounts.

Taiwan's benchmark stock closed at a record high on Friday, boosted by strong TSMC fourth-quarter earnings and a favourable investor reaction to the tariff deal.

"Taiwan is the first country the U.S. has publicly announced as receiving the most preferential treatment for chips and related products, highlighting that Washington views Taiwan as a key strategic partner in semiconductors," Taiwan Institute of Economic Research President Chang Chien-yi told Reuters.

TSMC ROLE

In a statement TSMC, the world's main producer of advanced AI chips welcomed the prospect of "robust" trade pacts between the United States and Taiwan, adding that all its investment decisions were based on market conditions and customer demand.

"The market demand for our advanced technology is very strong," it said. "We continue to invest in Taiwan and expand overseas." 

Once signed, the deal, will need to be ratified by Taiwan's parliament, where the opposition has the most seats and which has expressed concern about the "hollowing out" of the crucial chip industry under a U.S. trade deal.

Concerns Over Semiconductor Supply Chain

The objective was to bring 40% of Taiwan's entire chip supply chain and production to the United States, Lutnick told CNBC in an interview on Thursday. If they were not built in the United States, the tariff was likely to be 100%.

Kung said he did not know how the figure of 40% had been calculated but Taiwan estimated that by 2036, the production split between Taiwan and the United States would be 80/20 for the advanced chips, those of five nanometres and below. 

"This round of deployment will strengthen the resilience of Taiwan–U.S. and global semiconductor supply," he said.

"A moderate level of global diversification is also necessary. Going forward, the biggest AI orders will come from the U.S. market."

The semiconductor investment was the largest in U.S. history, Lutnick said in a post on X, alongside a picture of himself with Cheng, Taiwan's top trade representative Yang Jen-ni and U.S. Trade Representative Jamieson Greer. 

Sharing a similar picture on her Facebook page of the officials all together, Taiwan Vice President Hsiao Bi-khim said the island had shown its strength on the stage of global trade.

"Taiwan may not be large in area, but we are agile and innovative - and we are an indispensable force for good within the global supply chain," she added.

(Reporting by Wen-Yee Lee and Ben Blanchard; Additional reporting by Jeanny Kao, and Trevor Hunnicutt in Washington; Editing by Jacqueline Wong, Clarence Fernandez and Stephen Coates)