TSMC begins construction on third US semiconductor plant

Taiwan Semiconductor Manufacturing Co. (TSMC) has begun construction on its third semiconductor plant in Phoenix, Arizona, as part of its expansion in the US.

This development is the largest foreign investment in US history and aligns with the government’s initiative to boost domestic semiconductor manufacturing.

In March, TSMC CEO C.C. Wei announced plans to invest an additional US$100 billion in US facilities, building on the US$65 billion already committed.

TSMC is a key supplier to major companies like Apple and Nvidia, playing a crucial role in global chip production.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Reshoring semiconductor manufacturing represents a historical reversal

TSMC’s Arizona expansion marks a significant pivot in an industry that has been migrating away from the U.S. for decades despite American origins.

The semiconductor industry began with U.S. innovations like the first transistor at Bell Labs in 1947 and evolved through American-developed integrated circuits in 1959 that revolutionized electronics 1.

By the 1980s, manufacturing started shifting to Asia due to lower costs, resulting in the U.S. share of global semiconductor manufacturing capacity declining from 37% in 1990 to just 12% today 2.

This reshoring effort comes with enormous financial requirements. The CHIPS Act aims to triple domestic manufacturing capacity by 2032, requiring investments beyond the federal subsidies 2.

The workforce challenge is equally daunting, with the semiconductor industry facing a projected shortage of 70,000 skilled workers by 2025 and over a million by 2030 3, 4.

TSMC’s $165 billion commitment ($65B planned + $100B additional) represents the most significant foreign manufacturing investment in U.S. history, demonstrating both the scale required to meaningfully rebuild domestic capacity and the strategic importance of semiconductors to national security.

2️⃣ Tariffs and subsidies reshape the global semiconductor landscape

The TSMC expansion highlights how policy tools, both incentives and penalties, are fundamentally altering semiconductor supply chains and corporate strategies.

Tariffs on Chinese semiconductors increased dramatically from 25% to 50% in May 2024, creating strong incentives for companies to diversify supply chains away from China 5.