Taiwan's National Security Crackdown and Its Implications for Global Semiconductor Supply Chains

The semiconductor industry is at a crossroads. Taiwan's aggressive enforcement of its 2022 National Security Act has sent shockwaves through global supply chains, targeting key players like TSMC, Intel, and Tokyo Electron. These actions, framed as necessary to protect critical technology from geopolitical adversaries, have introduced new legal and geopolitical risks for investors. This analysis unpacks the implications for three pivotal players in the semiconductor ecosystem and what investors should watch for in 2025 and beyond.

Legal and Geopolitical Risks: A New Era of Scrutiny

Taiwan's crackdown has shifted from rhetoric to action. In 2025, prosecutors raided the residences of former TSMC executive Wei-Jen Lo and froze his assets, alleging violations of non-compete agreements and potential trade secret leaks. TSMC separately filed a lawsuit against Lo, while Intel denied any wrongdoing. Meanwhile, Tokyo Electron's Taiwan unit was charged with failing to prevent a former employee from stealing TSMC's trade secrets, potentially facing fines under the National Security Act.

These cases highlight a broader trend: Taiwan is no longer merely defending its semiconductor industry against external threats but is now holding domestic and foreign firms accountable for internal compliance. As one analyst noted, "The legal risks are no longer just about espionage-they're about corporate responsibility in an era of hyper-geopolitical tension."

The geopolitical stakes are equally high. The U.S. and Japan, key allies of Taiwan, have expressed concerns about the potential for overreach in these investigations. For example, Tokyo Electron's indictment could strain U.S.-Japan relations, as Japan's government has historically supported its semiconductor firms' access to Taiwanese technology according to reports.

Market Reactions: Resilience Amid Uncertainty

Despite the legal turbulence, TSMC's stock has remained resilient. In Q1 2025, the company reported a 35% year-over-year revenue increase, driven by demand for its 3-nanometer process and AI-related manufacturing. TSMC's global expansion -spanning the U.S., Europe, and the UAE-has further insulated it from short-term risks according to analysis. However, analysts caution that U.S.-China tensions could still cut TSMC's revenue by 7–15% if export controls on automotive and bitcoin mining chips tighten according to market reports.

Intel, meanwhile, has benefited from the shifting landscape. Its stock rose 2.9% in late 2025 as the company positioned itself as a beneficiary of U.S. efforts to reduce reliance on Asian manufacturing. Intel's $100 billion investment in U.S. fabrication and packaging facilities underscores its strategy to localize production and mitigate supply chain risks.

Tokyo Electron, however, has faced sharper headwinds. Its shares fell 7.5% following U.S. threats to restrict exports to China under the foreign direct product rule (FDPR) according to market data. While the company reported strong fiscal results in March 2025, driven by AI and HBM demand, investor sentiment remains cautious. The indictment of its Taiwan unit has raised questions about its ability to maintain partnerships with TSMC and other Taiwanese firms according to industry analysis.

Supply Chain Adjustments: Reshoring and Diversification

The crackdown has accelerated reshoring and diversification efforts across the industry. TSMC has taken a hardline stance on supply chain security, excluding Tokyo Electron from its 2025 Supply Chain Management Forum and tightening internal controls according to reports. Prosecutors allege that TEL employees illicitly obtained TSMC's 2nm process blueprints, prompting the company to favor local Taiwanese partners according to prosecutors.

Intel's strategy has focused on vertical integration. By building fabrication, packaging, and testing capabilities in the U.S., the company aims to reduce reliance on Asian assembly hubs according to industry analysis. This approach aligns with U.S. government incentives but comes with high costs and logistical complexity according to analysts.

Tokyo Electron, meanwhile, is pivoting toward advanced packaging and 3D chip architectures to stay relevant in a post-Taiwan-centric supply chain according to industry reports. However, its exposure to U.S.-China trade tensions remains a wildcard. As one report notes, "The company's ability to navigate geopolitical risks will depend on its agility in adapting to shifting export controls and customer demands."

Investment Considerations: Balancing Risk and Opportunity

For investors, the key question is how to balance the long-term growth potential of these companies with the short-term risks of geopolitical instability. TSMC's dominance in advanced nodes and global expansion make it a compelling long-term play, but its exposure to U.S.-China tensions and legal scrutiny in Taiwan cannot be ignored according to market analysis.

Intel's reshoring strategy offers a hedge against supply chain disruptions, but its $100 billion investment comes with execution risks. The company's success will depend on its ability to compete with TSMC in advanced packaging and AI-specific manufacturing according to industry experts.

Tokyo Electron sits in a more precarious position. While its fiscal results remain strong according to financial data, the indictment of its Taiwan unit and U.S. trade restrictions could erode margins. Investors should monitor its compliance efforts and ability to retain TSMC as a key customer according to analysts.

Conclusion: A Tectonic Shift in Semiconductor Dynamics

Taiwan's crackdown is more than a legal crackdown-it's a strategic reordering of the semiconductor industry. For TSMC, Intel, and Tokyo Electron, the stakes are clear: adapt to a world where national security and corporate compliance are inextricably linked. Investors must weigh the resilience of these companies' supply chains against the volatility of a geopolitical landscape that shows no signs of stabilizing.

As one expert put it, "The semiconductor industry is no longer just about Moore's Law-it's about Moore's Law plus geopolitical chess" according to a research paper. In 2025, the board is being redrawn, and the players who survive will be those who can navigate both the technical and political dimensions of this new era.