Building Techno-Arsenals for Democracy: Partnership with Taiwan in Semiconductor Supply Chain Restructuring amid Techno-Geopolitical Challenges

This chapter examines how tech middle powers (TMPs)—notably Europe and Japan—can regain techno-geopolitical leverage amid intensifying US–China rivalry. Drawing on scholarship and industry evidence, it shows that the US retains structural advantages at the artificial intelligence (AI) frontier, while China’s state-led expansion in mature-node semiconductors is narrowing European and Japanese firms’ room to compete globally. Europe and Japan face limited complementarities with the US, rising competitive pressure from China and incentives that pull firms toward China’s market rather than allied reshoring. The chapter advances a dual demand-side strategy that combines protection and promotion: protection through value-based regulation and targeted tariffs to counter subsidized dumping and mitigate security and human-rights risks; promotion through demand-anchored reshoring built on deeper partnership with Taiwan. TMPs can leverage Taiwan’s integrated design and foundry base and its scalable Original Equipment Manufacturer (OEM), Original Design Manufacturer (ODM) and Electronic Manufacturing Services (EMS) networks to cultivate niches in AI chips, diversify end-market applications and create the commercial incentives needed to sustain local manufacturing. The agenda operates across firm-to-firm, public-to-private and government-to-government layers, aligning R&D support, talent formation, trade arrangements and economic-security frameworks. Taken together, these measures form a TMP “workaround strategy” that builds geographically diversified supply chains, strengthens strategic autonomy within the US–China framework and contributes to modern technological arsenals for democracy.