Introduction
Taiwan Semiconductor Manufacturing Company (TSMC), the world’s most advanced chipmaker, has committed a staggering $165 billion to expand semiconductor production in the United States. This investment, which includes the development of six fabrication plants (fabs), two advanced packaging facilities, and a research and development (R&D) center in Arizona, represents a seismic shift in global semiconductor manufacturing. While this expansion strengthens economic ties between Taiwan and the U.S., it also raises significant economic, geopolitical, and strategic concerns.
Breaking Down the TSMC Investment
TSMC’s latest commitment builds on its previous $65 billion investment for three fabs in Phoenix from 2020 to 2024. In March 2025, the company announced an additional $100 billion to construct three more fabs, two packaging facilities, and an R&D center. The goal is to produce TSMC’s most cutting-edge nodes domestically in the U.S., reducing American dependence on foreign semiconductor supply chains.
Key Figures:
- Total U.S. investment: $165 billion
- Number of fabs: 6 (3 from the initial $65 billion, 3 more with the additional $100 billion)
- Federal funding: $6.6 billion under the CHIPS and Science Act
- Tax credits: Up to 25% of qualified capital expenditure from the U.S. Treasury Department
- Job creation: 20,000 to 25,000 high-paying positions
The U.S. government, under both Trump and Biden administrations, has actively encouraged this expansion, recognizing the national security and economic importance of advanced semiconductor production. However, the deal’s long-term benefits and risks remain highly debated.
Former President Donald Trump played a crucial role in convincing TSMC to establish a presence in the U.S., aligning with his administration’s focus on reshoring critical industries. The initial $12 billion Arizona fab announcement in 2020 was seen as a win for American manufacturing and a move to counter China’s growing technological influence.
Now, under the Biden administration, the CHIPS Act incentives have further solidified TSMC’s commitment to U.S. soil. Yet, there are rising concerns about how Washington’s trade policies—such as potential tariffs of up to 100% on Taiwanese semiconductors—could paradoxically increase costs and disrupt the very supply chains this investment seeks to protect.
Evaluating the Economic Impact
For the U.S.:
- Strengthens semiconductor independence: With geopolitical tensions escalating, particularly between the U.S. and China, securing a domestic supply of advanced chips is crucial for industries ranging from AI to defense.
- Job creation and economic growth: The massive investment is expected to stimulate the Arizona economy, creating thousands of skilled jobs.
- Higher operational costs: U.S. fabs are significantly more expensive to operate than their Taiwanese counterparts, potentially raising chip prices and impacting competitiveness.
For Taiwan:
- Geopolitical security trade-off: Taiwan’s dominance in semiconductor manufacturing has long been considered a ‘silicon shield,’ discouraging aggressive moves from China due to the island’s critical role in global supply chains. A shift of cutting-edge production to the U.S. could weaken Taiwan’s strategic importance.
- Tech leadership retained—for now: TSMC has reassured that its most advanced nodes will continue to be developed and first deployed in Taiwan. However, pressure to transfer more technology to the U.S. could mount over time.
- Economic risks: If more production shifts overseas, Taiwan risks losing high-value jobs and investment in its domestic semiconductor ecosystem.
The Road Ahead: Strategic Considerations and Uncertainties
While TSMC’s U.S. expansion aligns with Washington’s semiconductor security goals, questions remain about the long-term viability of these investments. Will the U.S. fabs be able to compete with Taiwan’s cost-efficiency? Can TSMC balance political pressures from both sides without jeopardizing its leadership position?
For Taiwan, maintaining its technological edge while navigating the shifting global semiconductor landscape will be crucial. The island’s policymakers may need to introduce stronger incentives to keep R&D and high-value manufacturing at home.
Conclusion: A High-Stakes Gamble
TSMC’s $165 billion U.S. expansion marks one of the most significant realignments in global semiconductor production. While this investment enhances America’s chip-making capabilities, it comes with substantial economic and geopolitical risks. The challenge for TSMC will be to sustain its technological dominance while balancing competing interests from Taiwan and the U.S. How this gamble plays out will shape the future of global technology and supply chains for decades to come.
