the main prerequisite for a country's participation in diplomatic relations and global institutions.

Ideal diplomatic capacity within this framework is highly dependent on such formal legality.

This condition reflects the dominant assumption in conventional diplomacy, which prioritises the

legal status of a state over the substantive functions or actual contributions of that entity within

conditions. Following the leadership transition in 2024 under Lai Ching-te, Taiwan continues to

incentives from China, but also systematically hinders Taiwan's participation in major forums

such as the World Health Assembly (WHA) and ICAO (Woo, 2024).

faced with clear evidence of the high global demand for advanced semiconductor chips from

thereby triggering an urgent need from the international community (Reinsch & Whitney, 2025).

Taiwan also proactively projects its moral legitimacy through the narrative of the "Frontline of

Democracy". While semiconductor superiority secures the material interests of developed

countries, shared democratic values such as open digital governance and constitutional

protection build strong normative alliances with European countries and the G7 group (Liu et al.,

2025). This dual combination of material capacity and moral legitimacy is crucial; it effectively

transforms Taiwan's position from merely an object of territorial dispute to an important subject

in global normative alliances. This, in turn, further thickens the layer of Taiwan's functional

recognition in the eyes of the world without the need to demand formal diplomatic recognition.

supplies often intersects with commitments to democratic values in determining international

military support (Kochumon & C.A, 2025; Lin et al., 2026; Weil et al., 2025). Meanwhile,

studies by Topal (2024) and Reinsch and Whitney (2025) place greater emphasis on the West’s

policies such as the CHIPS Act as part of efforts to mitigate risks and strengthen technological

sovereignty (Mehmet Topal, 2024; Peters, 2023; Reinsch & Whitney, 2025). Although the

literature has extensively examined the technical aspects and economic securitisation, the

majority of studies tend to portray Taiwan as an object in great power competition or merely as

diplomacy approach is not reactive, but rather structured through two main dimensions of

middle-power behaviour: routine and diffuse (Cooper, 1997). Taiwan routinely institutionalises

its diplomacy through technical collaboration, technology openness policies, and stable

semiconductor management. Meanwhile, Taiwan diffusely expands its influence through

TSMC's global supply chain network and collaboration with various international actors (Liu et

al., 2025). This approach consciously avoids heroic diplomacy, which is fraught with symbolic

confrontation, and instead opts for sustainable stability in order to consolidate Taiwan's position

as a reliable strategic player on the global stage.

research gap in measuring the effectiveness of this instrument as a functional shield amid the

relations, functional capacity carries real strategic weight to compensate for the various obstacles

arising from diplomatic isolation. The main benefit of this study is to offer an alternative

paradigm, in which the relevance and resilience of an international actor is no longer seen solely

in terms of formal institutional recognition, but is instead determined by its crucial and

irreplaceable role in the global supply chain and the world's normative order. Ultimately, this

study aims to investigate how Taiwan integrates its strengths in the semiconductor sector (the

in its formal diplomatic recognition during the 2024–2025 period?

relations research, which aims to understand foreign policy practices and diplomatic narratives

in a real-world context (Hall & Liebenberg, 2024). Through a descriptive qualitative approach,

researchers can integrate various document sources and text analyses to interpret the strategic

meaning behind the use of technological superiority and value legitimacy as an effort to maintain

international relevance in a structural context limited by formal state recognition.

and analysed Taiwanese government documents, TSMC annual reports, and international news

releases from 2024 to 2025. Government documents include official statements and foreign

policy strategies from Taiwan's Ministry of Foreign Affairs, as well as speeches and diplomatic

actions by President Lai Ching-te. Corporate data includes TSMC's strategic publications and

diplomatic relations with Taiwan and re-establish official relations with China, which was

reported to be the result of Beijing's intensive economic and political diplomacy (Woo, 2024).

democratic countries for Taiwan to be granted observer status, reflects a collective mechanism

that limits Taiwan's involvement in global health governance (WHO States Decide Not to Invite

route changes and Taiwan's participation in the International Civil Aviation Organisation

(ICAO) Assembly reveal recurring institutional obstacles, as reflected in legislative calls from

strategic partners such as the United States for Taiwan to gain meaningful participation in the

technical body (Shepardson, 2025). A similar pattern can be seen in other multilateral forums,

including APEC meetings and various bodies under the United Nations, which continue to

restrict Taiwan's participation in accordance with Beijing's enforcement of the "One China"

principle.

which note that a combination of political pressure, economic incentives from Beijing, and

procedural constraints in international institutions have resulted in conditions where formal

diplomatic recognition remains limited (L. Lee & Baptista, 2025). In this situation, Taipei

increasingly relied on functional cooperation and value-based diplomacy as adaptive

mechanisms to maintain international engagement amid persistent structural obstacles.

adjustment during the same period. Limited room for manoeuvre in formal diplomacy has

prompted the Taiwanese government to shift its diplomatic emphasis from recognition of

sovereignty to strengthening its functional role in the international system. In this context, the

semiconductor sector has emerged as a foreign policy instrument of high strategic value because

industry configuration as Taiwan Semiconductor Manufacturing Company (TSMC) expands its

manufacturing base to a number of countries of high strategic importance. This expansion is not

a corporate decision divorced from the political context, but is integrated with the industrial and

national security policies of the host countries. The United States, Japan, and Germany are the

main investment destinations because all three countries view semiconductors as a structural

component that affects economic competitiveness and long-term national security.

nanometre node chips and enable gradual technological improvements (Hunnicutt et al., 2025).

The United States government provides support through subsidies and fiscal incentives under the

initial facility will focus on mature and mid-range nodes to meet the needs of the domestic

automotive and electronics industries, while future plans include increasing technological

complexity (TSMC CEO Flags 3-Nanometre Chip Production in Japan, Investment Reported at

framework of its national economic security strategy, primarily to reduce the risk of supply

disruptions due to sole dependence on production sites in Taiwan.

Semiconductor Manufacturing Company (ESMC) project in Dresden, Germany, alongside

European industry partners. The project has received financial support from the German

government and the European Union and is placed within the framework of the EU Chips Act

Taiwan's role in the global digital economy (Blanchard & Hung, 2025). This situation ensures

that despite geographical diversification, the most advanced innovation and manufacturing

centres remain concentrated in Taiwan. The policy views semiconductors as cross-sector

infrastructure that supports the automotive, advanced manufacturing and energy industries, while

reflecting Europe's efforts to strengthen strategic technological resilience without completely

eliminating its dependence on Taiwan.

that the most advanced technological capabilities, particularly 2-nanometre chip production,

remain concentrated in Taiwan. Industry reports and official statements from TSMC indicate

that mass production of 2-nanometre chips is scheduled to begin in Taiwan in the second half of

nodes below 3 nanometres. This position makes TSMC a critical supplier to major technology

companies in the United States and its allies, particularly in the development of artificial

intelligence, high-performance computing, and advanced defence systems. This dependence is

structural because, to date, no other manufacturer has been able to match TSMC's combination

of production scale and technological capabilities (Him & Tang, 2026).

calculations of major countries, particularly with regard to stability in the Taiwan Strait.

Research findings show that although the United States, Japan and Germany are pushing for

supply chain diversification to reduce long-term risks, they still have a strategic interest in

Taiwan could have far-reaching consequences for the technological innovation and defence

capabilities of these countries.

instrument of national security that affects geopolitical balance and international stability (TSMC

market and virtually all chip production below 3 nanometres has created a structural dependency

that compels developed nations to regard the stability of the Taiwan Strait as a matter of their

own national security (Varas et al., 2021). TSMC’s expansion into the United States via the

CHIPS Act (Arizona), Japan (Kumamoto), and Germany via the EU Chips Act (Dresden) during

the 2024–2025 period actually strengthens this security shield by integrating Taiwan into the

national security infrastructure of its strategic partners, even though cutting-edge innovations

2025; Miller, 2022).

(2024–present) shows a shift in foreign policy orientation from an emphasis on formal

sovereignty recognition to strengthening functional influence based on the normative narrative

of the "Frontline of Democracy." An analysis of presidential speeches reveals consistency in

positioning Taiwan as an actor that links its political legitimacy to liberal democratic values,

particularly in the context of increasing geopolitical pressure in the Indo-Pacific region. The

2026 New Year's speech is an important reference because it contains an affirmation that the

protection of constitutional democracy is understood as a political mandate derived from the will

European countries and the G7 group. Empirical data shows an increase in interactions between

Taiwanese officials and European institutions, particularly the European Parliament, which has

resulted in a number of resolutions and joint statements on the stability of the Taiwan Strait

(Nathan et al., 2021). These statements consistently frame the Taiwan Strait as an issue related to

international economic and political stability, without implying formal diplomatic recognition of

Taiwan. From a soft power perspective, Taiwan's domestic values such as the rule of law,

protection of human rights, and democratic procedures serve as diplomatic resources that

enhance Taiwan's political appeal in the eyes of its democratic partners. This pattern

demonstrates the formation of normative alignment-based support that expands Taiwan's

through technology openness policies and disinformation management. Research findings show

digital security. The difference in approach between Taiwan's digital openness and China's more

controlled model of political communication reinforces the perception of Taiwan as an actor that

promotes democratic principles in the digital space (Cooper, 1997).

shows a concentration of diplomatic resources on niches of values and policy practices that are

highly relevant in the international environment. Rather than pursuing a broad spectrum of

diplomacy, Taiwan is focusing its policies on issues that are in line with its institutional capacity

and political identity, particularly constitutional democracy and digital governance (Gardner et

al., 2024). This approach is in line with the concept of niche diplomacy, which emphasises that

countries with structural limitations can maintain international engagement through

recognition into functional recognition that can be operationalised in international relations.

Taiwan's involvement in policy dialogue, exchange of expertise in handling disinformation, and

digital collaboration with democratic countries reflects a form of engagement that is repetitive

and institutionalised. This pattern shows that the effectiveness of niche diplomacy does not

depend on expanding the number of formal diplomatic partners, but rather on a country's ability

to maintain access, presence, and influence in relevant international policy processes. Thus, the

case of Taiwan provides empirical contributions to the understanding of niche diplomacy as an

adaptive strategy for small countries facing political pressure and limitations on sovereignty

recognition.

economic commodity, but have shifted to become an instrument of national security that forces