TSMC Catapults $165 Billion into America's Chip Race—Is It Overshooting?

Business Insider

6 hours ago

Taiwan Semiconductor Manufacturing Company (TSM) has long been the crown jewel of global chipmaking. As the primary supplier of semiconductors to tech giants like Nvidia (NVDA), Apple (AAPL), AMD (AMD), and Qualcomm (QCOM), its fabrication facilities—or 'fabs'—represent the beating heart of the modern digital economy. But now, TSMC's decision to stretch itself across multiple continents is testing both the limits of its strategic bandwidth and the patience of investors.
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U.S. Expansion Comes at a Cost
TSMC's massive $165 billion commitment to the United States has become a political showpiece. The company is planning to construct three chip plants on U.S. soil, including a highly anticipated facility in Arizona that aims to manufacture chips using its bleeding-edge 2-nanometer process by 2028.
But there's a catch. That timeline is years behind the production rollout for the same technology in Taiwan. This means that even with factories physically present in the U.S., American tech firms may still need to import the most advanced chips directly from Taiwan—at least for now.
Meanwhile, TSMC's international ambitions are beginning to buckle under the weight of competing priorities. A second plant in Japan's Kumamoto prefecture, part of a $20 billion initiative, is reportedly facing delays as the company reallocates focus and resources toward U.S. development. That signals a deeper challenge: the balancing act between political appeasement, logistical execution, and technological leadership may not be sustainable across too many borders.
A Strategic Tug-of-War over Sovereignty and Supply Chains
Adding further complexity is Taiwan's recent legislation aimed at keeping its most advanced manufacturing capabilities on the island. This policy ensures that TSMC's overseas facilities remain at least one generation behind its domestic fabs. While this move strengthens Taiwan's strategic leverage, it also imposes a ceiling on how useful the U.S. or Japanese plants will be in producing the most cutting-edge chips.
The implication is significant: TSMC's global expansion might not offer a full solution to the West's concerns about semiconductor dependency. Even with billions invested abroad, the technological crown jewels remain geographically (and politically) tied to Taiwan.
Will the World's Fab Leader Stretch Too Thin?
The fundamental investor concern is whether TSMC is biting off more than it can chew. Juggling multi-billion-dollar chip projects across regions with different regulatory, political, and logistical challenges could lead to execution risk and underutilized capacity.
TSMC insists its plans are driven by customer demand and strategic opportunity, stating that U.S. investment won't derail other regional expansions. But the practical reality, as evidenced by the Japan delay, suggests trade-offs are unavoidable.
Adding to the uncertainty is the specter of tariffs. So far, semiconductors have been spared from Trump-era trade levies, but the U.S. Department of Commerce is currently investigating whether imported chips should be subjected to national security-related duties. That introduces yet another layer of unpredictability.
What It Means for TSMC Stockholders
Shares of TSMC dipped 0.5% on Friday in Taipei, a relatively modest move given the scale of developments. But beneath the surface, the company's next chapter appears more complicated than ever. Investors must now weigh the benefits of geopolitical hedging against the executional risks of building ultra-complex manufacturing capacity across multiple geographies.
TSMC remains indispensable to global tech—but it may soon have to prove that it can be equally indispensable in more than one place at a time.
Is Taiwan Semi a Good Stock to Buy?
According to TipRanks, Taiwan Semiconductor (TSMC) currently holds a 'Strong Buy' rating based on 9 analyst reviews over the past three months. Of those, eight analysts recommend a Buy, one recommends Hold, and none recommend a Sell. This is a rare sign of near-unanimous optimism.
The average 12-month TSM price target stands at $231.63, suggesting a marginal 1.35% downside.