Taiwan’s Strategy for Addressing the United States–China Semiconductor Industry Rivalry

Abstract

The intensifying semiconsuctor industry rivalry between the United States and China has increased Taiwan’s strategic significance within the global semiconductor industry while placing the island in a complex position amid great power competition. This article examines Taiwan’s strategy in navigating the U.S. China semiconductor rivalry by arguing that Taiwan’s policy response cannot be explained solely by structural pressures arising from international competition but must also be understood through the domestic factors shaping foreign policy decision-making. Employing a qualitative research approach and library research method, this study utilizes the perspective of neoclassical realism to analyze the interaction between external pressures generated by U.S.–China technological competition and domestic variables influencing Taiwan’s strategic choices. The findings reveal that Taiwan has adopted a hedging strategy characterized by the simultaneous strengthening of technological, economic, and security cooperation with the United States while maintaining economic relations with China. Although growing security concerns and technological alignment have encouraged closer cooperation with Washington, Taiwan remains economically interconnected with China through trade, investment, and semiconductor supply-chain networks. The study further demonstrates that Taiwan’s hedging strategy is shaped by several domestic factors, including the political orientation of governing administrations, party competition, national economic interests, and the strategic importance of the semiconductor industry, particularly the central role of Taiwan Semiconductor Manufacturing Company (TSMC) in global production networks.