HSINCHU, Taiwan — Silicon Valley may be the heart of global tech, but its pulse depends on high-end microchips made largely in a science park on Taiwan’s west coast. That park has been home to Taiwan Semiconductor Manufacturing Company (TSMC) since its founding nearly four decades ago. TSMC’s chips power everything from phones to cars, and by some estimates it produces over 90% of the world’s most advanced chips.
But the strategic landscape is changing. As U.S.-China rivalry intensifies and chips are increasingly tied to national security for use in military systems and artificial intelligence, geopolitical pressures are reshaping TSMC’s choices. Beijing has stepped up political pressure on Taiwan; TSMC’s headquarters and much of its production sit less than 100 miles from China across the Taiwan Strait. The semiconductor sector has long been seen as a “silicon shield” for Taiwan, but that calculus is shifting.
TSMC’s leadership frames expansion partly as meeting customer demand. Chief Financial Officer Wendell Huang told NPR in October: “As a company, all we can do is focus on our fundamentals: technology leadership, manufacturing excellence, and then the customers’ trust. We don’t know politics. That’s between the governments.” Still, politics have influenced where customers and suppliers locate, and TSMC is responding.
Many of TSMC’s customers — equipment makers, chip designers and hardware firms like Applied Materials and Qualcomm — maintain offices near the Hsinchu facilities to stay close to the foundry. To be nearer to key clients and to diversify production, TSMC began building fabs outside Taiwan in recent years. In 2020 it announced plans for fabs in Arizona; the first Arizona plant ramped to high-volume production late last year. The company plans a total of six fabs in Arizona, two advanced packaging sites and a U.S. research and development center. TSMC is also expanding in Japan and Germany.
“Seventy percent of our revenue is from the U.S., and most of these customers want advanced technology,” Huang said, explaining why the Arizona facilities will house advanced technology fabs. Demand for U.S.-made advanced chips has surged, fueled by consumer, enterprise and cloud needs — especially AI.
U.S. policy has pushed to reshore chipmaking and restrict advanced technology access to China. The Biden administration’s CHIPS Act offered incentives to boost domestic capacity and limit China’s access to cutting-edge chips. The following U.S. administration continued that approach, using incentives and restrictions to encourage onshore production and curb transfers. Recent policy moves include the U.S. government taking a stake in Intel and agreements affecting sales of advanced chips abroad.
TSMC’s recent financials reflect booming demand. In mid-October the company reported quarterly revenue up more than 30% year over year and profits jumping nearly 40%, driven largely by its high-performance computing division, which supplies chips for AI workloads. Huang said TSMC sees strong, sustained demand for AI-related products and believes the trend will continue.
TSMC’s business model underpins its position. As a pioneer of the “pure play foundry” model, TSMC focuses on manufacturing rather than designing chips. Customers like Apple, Sony and Nvidia outsource production to TSMC, trusting its technology leadership and manufacturing excellence. Serving more than 500 customers, TSMC spreads risk across many potential winners in future markets.
Expansion overseas also answers practical needs: access to land, water and power, and new talent pools. “This is a small island. Resources are limited. So we need to expand overseas,” Huang said. Still, TSMC plans to maintain significant investment and research capacity in Taiwan. “We will still have a home base in Taiwan,” he added, signaling that while the company diversifies geographically, Taiwan remains central to its operations and innovation.