As former President Donald Trump wielded trade policies like a cudgel, Taiwan Semiconductor Manufacturing Company (TSMC) found itself walking a geopolitical tightrope. The chipmaker's massive U.S. investment pledge raises critical questions about profitability and political pragmatism.
When TSMC CEO C.C. Wei announced an additional $100 billion investment in U.S. facilities this March, the move temporarily defused Trump's accusations that Taiwan was "stealing" America's semiconductor industry. The former president praised the commitment as bringing "a substantial proportion" of chip manufacturing back to U.S. soil.
The Market's Skeptical Stance
Investors, however, remained unconvinced. Since Trump took office, TSMC's American depositary receipts have fallen over 17% from January's record highs. Concerns center on two issues: potential failure to meet Washington's expectations could invite further pressure, while rapid U.S. expansion might erode TSMC's industry-leading net margins.
Notably, TSMC provided scant details about the $100 billion commitment—a stark contrast to its transparent 2020 announcement of Arizona factories, which included precise timelines, production technologies, and output projections. This time, the company vaguely referenced three additional wafer fabs and two advanced packaging facilities for AI chips, a capability currently lacking in the U.S.
The R&D Conundrum
Bain & Company partner Peter Hanbury notes TSMC's research operations remain firmly rooted in Taiwan. "The R&D challenge is significant," he observes. "Relocating cutting-edge development—whether for TSMC, Intel, or Samsung—is extraordinarily difficult geographically."
Insiders suggest the $100 billion figure represents long-term cost projections rather than binding commitments. TSMC had already purchased land for six Arizona fabs in 2020. "We've always planned for phased expansion," one source clarifies. "With our first fab achieving commercial production and good yields, we're executing that vision."
The Tariff Sword of Damocles
TSMC's respite from U.S. pressure remains fragile. Trump has repeatedly floated semiconductor tariffs that could raise costs for clients like Apple and Nvidia, potentially forcing TSMC to absorb part of the burden. While Washington postponed tariff decisions until after April 2's "reciprocal tariffs" announcement, industry experts consider this a temporary reprieve.
"Trump needs sustained tariff leverage to ensure TSMC and others deliver on promises," warns an executive at a TSMC client company. "He clearly likes the $100 billion headline, but nobody thinks that's the endgame."
Profitability Versus Geopolitics
Even at full build-out, Bernstein analysts estimate TSMC's Arizona output would constitute just one-third of its early-2030s revenue. Bank of America's Brad Lin calculates the $165 billion total U.S. investment might capture 23-28% of TSMC's advanced process capacity by 2026—though logistical realities could shrink that share.
"No global company can simultaneously construct six fabs, especially in the U.S.," Lin emphasizes, citing equipment and labor bottlenecks. Maintaining TSMC's projected 53% gross margin requires Arizona fabs to achieve 40% profitability—a steep challenge given their current losses.
Yet long-term drivers may justify the gamble. TSMC executives acknowledge Taiwan's constraints in engineering talent, land, and utilities necessitate overseas expansion. The $100 billion wager ultimately bets on three uncertainties: U.S. policy stability, semiconductor industry trends, and TSMC's ability to outmaneuver geopolitical turbulence while preserving technological dominance.