Japan's $550 billion trade deal could reshape semiconductor production in the U.S. by financing Taiwanese TSMC plants. What does this mean for global supply chains?
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| Japan’s $550 billion investment plan could help Taiwanese TSMC set up new semiconductor plants in the U.S., fostering stronger supply chains and reducing tariff barriers. Image: CH |
TOKYO, Japan – July 27, 2025:
In a move that could alter the global semiconductor landscape, Japan has committed to a $550 billion investment package in the U.S., part of a broader trade agreement. This investment is designed to foster stronger economic ties and secure supply chains, but one key beneficiary could be Taiwan’s Taiwan Semiconductor Manufacturing Company (TSMC), a global leader in chip production.
The deal, which includes equity investments, loans, and guarantees, was agreed upon this week in exchange for the U.S. reducing tariffs on Japanese exports. However, the agreement raises a critical question: Could this funding be the catalyst for expanding TSMC’s operations in the U.S., and what implications would that have on the broader semiconductor industry?
Ryosei Akazawa, Japan’s top trade negotiator, emphasized that Japan, the U.S., and other like-minded nations are working together to secure supply chains for industries critical to economic security. This includes not just U.S. and Japanese companies, but also Taiwanese firms like TSMC, which could play a central role in this plan.
“If a Taiwanese chipmaker builds a plant in the U.S. and incorporates Japanese components or customizes products to meet Japan’s needs, that’s acceptable,” Akazawa said, leaving the door open for TSMC to expand its U.S. footprint. But why would Japan’s investment package, designed primarily to strengthen its own economic standing, choose to include Taiwan?
The answer lies in the geopolitical importance of TSMC’s role in U.S. semiconductor production. As the U.S. becomes increasingly reliant on Taiwan’s advanced chip manufacturing, the concern over economic security is growing, particularly given Taiwan’s proximity to China. The U.S. has been vocal about diversifying its semiconductor supply chains to mitigate risks posed by geopolitical instability in the region.
TSMC’s $100 billion U.S. investment is already underway, with $65 billion allocated to building three new semiconductor plants in Arizona, one of which is operational. But could Japan’s $550 billion investment package supercharge this expansion?
Japan’s commitment to financing through state-backed entities like the Japan Bank for International Cooperation (JBIC) and Nippon Export and Investment Insurance (NEXI) raises the stakes. These entities can now fund projects that support Japan’s economic security, including foreign firms. This would mean that if TSMC meets specific criteria, such as using Japanese components or adapting products for the Japanese market, it could become a prime candidate for this investment.
Akazawa has been clear that equity investments will make up only 1%-2% of the total $550 billion, with the majority of funds directed through loans and guarantees. While the White House has stated that the U.S. would retain 90% of the profits from the deal, Akazawa clarified that this refers to returns on the minor portion of equity investments. The bulk of the funding is expected to flow into loans and guarantees, aimed at long-term infrastructure projects, including those by companies like TSMC.
One critical question that remains is whether Japan’s decision to accept a smaller share of the profits—less than initially hoped—will be worth the long-term economic benefits of the trade deal. Akazawa downplayed the loss in profit-sharing, suggesting that avoiding roughly ¥10 trillion ($67.72 billion) in tariffs would more than compensate for the reduced share. Still, the profit-sharing issue could have long-term implications on the balance of power in this economic partnership.
With Japan committing to deploying the $550 billion during U.S. President Donald Trump’s current term, the next few years could reshape the semiconductor supply chain landscape in the U.S. This deal could propel Taiwan’s TSMC into a more dominant position in the U.S. market, cementing Japan’s role as a key partner in global semiconductor production. However, questions remain about the broader geopolitical consequences of these moves, particularly regarding U.S.-China tensions and the future of Taiwan’s chip industry.
As Japan continues its strategic partnership with the U.S. and Taiwan, the stakes are high for both economic growth and geopolitical stability. Only time will tell how this massive investment package will influence the global semiconductor sector.