HSINCHU, Taiwan — While Silicon Valley is often seen as the center of global tech, much of the industry’s performance hinges on advanced microchips produced in a science park on Taiwan’s west coast. That park has been the heart of Taiwan Semiconductor Manufacturing Company (TSMC) since its founding nearly 40 years ago. TSMC’s processors power phones, cars and data centers, and by some measures it produces more than 90% of the world’s most sophisticated chips.
But the strategic picture is shifting. As U.S.-China competition intensifies and semiconductors become central to national security, supply chains and factory locations are being reevaluated. Beijing has increased political pressure on Taiwan; TSMC’s headquarters and much of its manufacturing sit less than 100 miles across the Taiwan Strait from China. For years the semiconductor industry was described as a “silicon shield” for Taiwan; today that assumption is changing as companies and governments weigh new risks.
Company leaders emphasize customers and technology as primary drivers of expansion. CFO Wendell Huang has said the firm focuses on fundamentals — technology leadership, manufacturing excellence and customer trust — and that political decisions are matters for governments. Still, geopolitical dynamics have altered where customers, suppliers and partners locate, and TSMC is adapting.
Many of TSMC’s customers — equipment suppliers, chip designers and major hardware firms like Applied Materials and Qualcomm — keep teams near the Hsinchu facilities to collaborate closely with the foundry. To bring production closer to major clients and to reduce concentration risk, TSMC has begun building plants beyond Taiwan in recent years. The company announced Arizona fabs in 2020, and the first Arizona plant reached high-volume production late last year. TSMC plans up to six fabs in Arizona, alongside two advanced packaging sites and a U.S. research and development center. It is also expanding capacity in Japan and Germany.
TSMC points to customer demand as a key rationale for U.S. investment. Around 70% of its revenue comes from U.S. customers, many of whom require leading-edge technologies. Demand for U.S.-made advanced chips has surged, especially for high-performance computing and artificial intelligence workloads.
U.S. policy has pushed both to reshore chipmaking and to curtail access to cutting-edge technologies for China. The Biden-era CHIPS Act offered incentives to boost domestic capacity and limit the flow of advanced semiconductors abroad; subsequent administrations have continued to combine incentives with export restrictions to encourage onshore production while limiting transfers of sensitive technology.
Those market forces show in TSMC’s results. In mid-October the company reported quarterly revenue up more than 30% year over year and profits rising nearly 40%, driven largely by its high-performance computing division that supplies AI-focused chips. Company executives say they expect AI-related demand to remain strong and sustained.
TSMC’s business model helps explain its dominant position. As a pioneer of the “pure-play foundry,” the company focuses on manufacturing rather than chip design. Global customers such as Apple, Sony and Nvidia outsource fabrication to TSMC because of its process leadership and production scale. Serving more than 500 customers allows TSMC to spread risk across multiple market winners.
Practical considerations also push expansion: Taiwan is a small island with limited land, water and power, and building large-scale fabs requires access to those resources and to new talent pools. Huang has said these constraints make overseas expansion necessary. At the same time, TSMC stresses it will keep substantial investment and research capabilities in Taiwan — maintaining the island as its innovation and operational base even as production footprints diversify globally.