TSMC, the world's largest contract chipmaker, has become entangled in a patent lawsuit in the United States. Some US Republican lawmakers are demanding strict enforcement of patent rights, saying "there should be no special treatment." But concern is also emerging in Washington political circles over the blade aimed at TSMC, a key partner in the US semiconductor industry that has pledged a massive $265 billion (about 403.595 trillion won) investment in the United States.
According to US media outlets including Axios on Tuesday, Irish companies Longitude Licensing and Marlin Semiconductor have filed a lawsuit with the US International Trade Commission (ITC) over TSMC's alleged patent infringement. An administrative law judge is expected to issue a preliminary ruling this month, with the ITC making a final decision around October.
The plaintiffs are affiliates of IP Value Management, a company owned by US private equity fund (PEF) Vector Capital. They claim that chips made in TSMC's most advanced processes have infringed on their patents. Marlin Semiconductor acquired some of the patents in 2021 from Taiwan's UMC, a TSMC competitor. While many companies including Apple and Broadcom appear in the suit, Axios noted that the core target is TSMC, the main supplier of nearly all semiconductors supplied to the US market.
The case is drawing further attention as demands have emerged in the US Congress to punish TSMC severely. According to a letter obtained exclusively by Axios, Republican Rep. Ryan Zinke and others urged ITC Chair Amy Karpel to block imports of overseas-manufactured chips found to have infringed US patents. They argued that strong patent enforcement protects US competitiveness and that companies should not receive special treatment simply because they are strategically important.
US President Donald Trump, in an interview, said, "Intel should have become the biggest company in the world right now," pointing to Taiwan's TSMC market dominance as the cause.
By contrast, Democratic House and Senate members representing Arizona, where TSMC's plant is being built, actively defended TSMC. TSMC has pledged an investment of about $165 billion (about 253 trillion won) in Arizona. Ahead of the Republicans, they sent a letter to the ITC warning that legal action affecting TSMC could disrupt semiconductor production, artificial intelligence (AI) development and national defense, as well as the Arizona economy. The preliminary ruling on the case is expected this month, with the ITC full commission's final decision expected around October.
However, TSMC is not an easy target for the United States to sanction. According to company filings, 75% of TSMC's revenue last year came from North America, and its share price has risen 96% from the start of the year amid the AI boom and semiconductor supply shortages. For President Trump, who used reciprocal tariffs as leverage to draw out TSMC's massive investment, TSMC is also an "important counterpart."
TSMC's Arizona plant plan was carried out under former President Joe Biden, but the scale grew last March when President Trump announced an additional $100 billion (about 153 trillion won) investment at the White House. TSMC plans to invest $265 billion to build 10 semiconductor production facilities in the United States, including in Arizona. The fact that the US semiconductor supply chain has become precarious amid the global semiconductor shortage and conflict with China is another reason TSMC cannot be easily sanctioned.
Taiwan's government paid a relatively high price, with Taiwanese companies pledging to directly invest $250 billion in the United States in exchange for a reduction in tariffs on Taiwanese products from 20% to 15%. If TSMC, Taiwan's national company, is hit, the Taiwanese government is likely to respond at the government level. According to Taiwan's Central News Agency, Taiwan's Ministry of Economic Affairs said, "Taiwan's semiconductor industry has long valued intellectual property rights and operates legally in all major business locations worldwide," adding that the case is "under review and the government respects the relevant procedures."
