Taiwan Semiconductor's Investment in U.S. 2nm Chip Development

In September 2024, TSMC secured an additional $7.5 billion for its Arizona operations, following a previous $5 billion investment earlier in the year. The first Arizona fab is expected to begin mass production using 4nm technology in the first half of 2025, while the second fab is slated to produce chips using 3nm and 2nm technologies by 2028. With total investments in Arizona exceeding $65 billion, TSMC aims to solidify its position as a leading supplier of AI chips amidst increasing competition and geopolitical tensions, particularly between the U.S. and China. This strategic move not only positions TSMC ahead of its competitors but also reflects its commitment to expanding its footprint in the U.S. semiconductor landscape, which is crucial given the rising demand for AI applications across various sectors.

Geopolitical Context

Despite the promising outlook for TSMC’s U.S. investments, the company faces significant geopolitical risks. Tensions between the U.S. and China remain high, especially with China’s claims over Taiwan. Chinese leader Xi Jinping has reiterated his commitment to “reunification” with Taiwan, which could pose challenges for TSMC’s operations and investments. Additionally, U.S. sanctions against China restrict the latter’s access to advanced semiconductor technologies, further complicating the landscape in which TSMC operates.

Market Implications

As TSMC continues to expand its capabilities, it accounts for a substantial portion of Taiwan’s stock market, with ETFs likely to attract both retail and institutional investors. The company’s advancements in chip technology are critical for tech giants that rely on TSMC for their AI ambitions, thus influencing market dynamics in the semiconductor industry.