Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) is broadening its operational footprint across the globe. This strategic move is primarily motivated by the limited availability of land in Taiwan for large-scale industrial development. Concurrently, a recently established trade pact between the United States and Taiwan, which imposes tariffs on Taiwanese goods, is also stimulating substantial investment from TSMC into the American market. This development prompts a critical examination of where the company's most sophisticated chip manufacturing facilities will ultimately be situated.
According to Chang Chien-yi, the president of the Taiwan Institute of Economic Research, the primary factor compelling Taiwanese enterprises to increase their foreign direct investment is the domestic scarcity of suitable land for extensive industrial projects, rather than the imposition of tariffs. Chang highlighted that leading companies like TSMC cannot simply establish advanced manufacturing sites in densely populated urban centers, citing Taipei's Xinyi District as an example. This constraint underscores the necessity for these firms to seek expansion opportunities beyond Taiwan's geographical confines.
The U.S.-Taiwan trade agreement, which involves a 15% tariff on Taiwanese imports—mirroring rates applied to South Korea, Japan, and the European Union—is set to catalyze significant investment. Under this provisional arrangement, Taiwan's semiconductor and technology sectors, spearheaded by TSMC, are projected to inject at least $250 billion into the U.S. economy. Addressing concerns about potential economic erosion in Taiwan, Chang projected that a substantial majority, approximately 75% to 80%, of Taiwan's semiconductor supply chain will remain on the island by 2030, despite American aspirations to attract a larger share of chip production.
TSMC Chairman C.C. Wei emphasized that the company's overseas ventures are predominantly a response to client demand, rather than governmental pressure. While TSMC is actively augmenting its presence in Arizona, economists anticipate that only a modest proportion of its most advanced chip production will be transferred to the U.S. in the immediate future. Lien Hsien-ming, president of the Chung-Hua Institution for Economic Research, estimates that less than 15% of TSMC's cutting-edge manufacturing processes are likely to be relocated to the U.S. by the conclusion of President Donald Trump's potential second term. He also suggested that current construction timelines make it improbable for Washington to achieve its objective of relocating 40% of Taiwan's chip supply chain to the U.S. before 2029.
Lien cited TSMC's substantial investments in Arizona, totaling $65 billion for the construction of three fabrication plants, with an additional $100 billion committed for future facilities, assembly plants, and a research center. Equipment installation has already commenced at the second Arizona fab, with mass production slated for 2027, and construction of a third fab began this year. However, later projects are not expected to reach full production capacity before the end of Trump's term. The company's ongoing expansion in Arizona is intended to support key clients such as Nvidia Corp., bolstered by the new U.S.-Taiwan trade agreement that reduces tariffs on Taiwanese goods and includes substantial investment pledges. TSMC's American strategy centers around a vast "gigafab" complex in Arizona, and the company has expanded its land holdings to accommodate future growth. As of premarket trading on Tuesday, TSMC shares experienced a 1.03% increase, reaching $336.15.
TSMC's strategic global expansion is fundamentally shaped by the practical limitations of land availability in its home country, Taiwan. While trade agreements with the United States are prompting significant investments abroad, the core of its most advanced chip production is projected to largely remain in Taiwan for the foreseeable future. This measured approach reflects a balance between responding to customer needs, navigating international trade dynamics, and managing the logistical realities of high-tech manufacturing.