Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) is undertaking substantial growth initiatives beyond its home island, largely to circumvent the severe scarcity of available land for large-scale industrial projects in Taiwan. This spatial limitation presents a significant obstacle to expanding the company’s advanced manufacturing capabilities domestically.
Chang Chien-yi, President of the Taiwan Institute of Economic Research, highlighted that the primary motivation for Taiwanese semiconductor companies to pursue foreign direct investment is the lack of suitable land within Taiwan rather than protective tariffs. He explained that Taiwan's urban areas, such as Taipei’s Xinyi District, do not have the necessary space to accommodate the development of new, advanced chip fabrication facilities. This logistical challenge compels firms like TSMC to explore and invest in overseas locations to maintain growth and respond to market demand.
A recent tentative trade arrangement between the United States and Taiwan involves commitments by Taiwanese semiconductor and technology companies, with TSMC leading the charge, to channel at least $250 billion into U.S.-based investments. In parallel, the U.S. government will impose a 15% tariff on Taiwanese goods, aligning tariff rates with those previously established against South Korea, Japan, and the European Union.
Amid concerns about potential economic hollowing-out of Taiwan's semiconductor sector, Chang noted research findings suggesting that by 2030, approximately 75% to 80% of Taiwan's semiconductor supply chain is projected to remain on the island. This projection persists despite U.S. efforts aimed at reshoring semiconductor manufacturing and diversifying supply chains.
Further emphasizing the company’s perspective, Chang cited TSMC Chairman C.C. Wei, explaining that TSMC’s decision to expand overseas is predominantly driven by fulfilling customer requirements rather than succumbing to governmental pressures or trade policies. This customer-centric motivation shapes the timing and scale of TSMC’s international manufacturing footprint.
TSMC has made marked progress in escalating its manufacturing presence in the United States, particularly in Arizona. However, economists point out that only a limited fraction of TSMC’s production of the most technologically sophisticated chips is anticipated to move to the United States during the near term.
According to Lien Hsien-ming, President of the Chung-Hua Institution for Economic Research, less than 15% of TSMC’s most advanced manufacturing processes are expected to be transferred to the U.S. by the conclusion of President Donald Trump’s second term in office. The current construction and development timeline make it improbable for the U.S. to reach its stated objective of relocating 40% of Taiwan’s semiconductor supply chain to domestic soil by 2029.
TSMC’s investment in Arizona includes a commitment of $65 billion toward constructing three fabrication plants ('fabs'). Additionally, the company has pledged a cumulative $100 billion to support the establishment of more fabs, assembly facilities, and a research center within the state. The second Arizona fab is presently undergoing equipment installation, with mass production scheduled for 2027. Construction of the third fab commenced in 2023, but further projects are expected to only become operational well beyond the timeline of the current presidential term.
This progressive expansion enables TSMC to actively service clients such as Nvidia Corporation (NASDAQ: NVDA) on American soil. The recently agreed-upon U.S.-Taiwan trade deal, which includes a fixed 15% tariff on Taiwanese exports and stipulated investment commitments, facilitates this strategy.
TSMC envisions anchoring its long-term U.S. operations around a major 'gigafab' hub in Arizona, supplementing its existing Arizona land allotments to accommodate continuing growth. Despite these developments, the heart of advanced semiconductor production remains in Taiwan, with a majority of critical manufacturing processes retained on the island to sustain technological leadership and operational continuity.
Reflecting market responses, TSMC’s shares were recorded to be up by 1.03% at $336.15 during premarket trading, underscoring investor recognition of the company’s dynamic global positioning and growth trajectory.