Tariff Threats Spur TSMC’s Taiwan Peers to Seek US Expansion

In March, President Donald Trump and Taiwan Semiconductor Manufacturing Co.’s C. C. Wei announced a $100 billion investment in the US, marking one of the largest foreign investments in US history. This move aims to revive high-end chip manufacturing in the US. For Trump, it was a significant moment 43 days into his second term. For Richard Lee, chairman of Taiwan’s largest manufacturing trade association, it was a call to action.

“We didn’t put the United States as the first priority. Now we need to put United States as the first and foremost priority,” Lee said. Taiwan’s manufacturing giants, known for their expertise in electronics, are leading the shift towards US manufacturing. This migration, initially driven by US sanctions and export controls, has accelerated due to the current president’s threats of additional tariffs and trade barriers.

In addition to TSMC, Foxconn Technology Group is collaborating with Apple Inc. to establish an AI server assembly site in Texas. Foxconn, which manufactures Apple’s iPhones and Nvidia’s AI servers, plans to expand production in several US states in partnership with its customers. The company has discussed further investments in Pennsylvania and Texas with US officials.

Smaller Taiwanese companies are also making moves. Wiwynn Corp. approved a $300 million capital increase for its US operations to expand in Texas. Quanta Computer Inc. has allocated $230 million to build more AI servers in the US and recently leased a factory in Nashville. Compal Electronics Inc. is bidding for server factories in the US, which could cost over $3 billion and add 1,500 US workers.

“I don’t think there are any excuses for not being more aggressive with investments in the United States,” said Lee, who heads the Taiwan Electrical and Electronic Manufacturers’ Association (TEEMA). Trump’s policies have been controversial, causing stocks and consumer sentiment to tumble due to uncertainty over tariffs and other measures. However, tech companies are beginning to increase their investments. Major companies like Apple, Meta Platforms Inc., and SoftBank Group Corp. have pledged over $1 trillion in investments since Trump’s second inauguration.

The path to US expansion is not without challenges. TSMC faced union disputes over its Arizona semiconductor plant construction and a lawsuit alleging discrimination against American workers. Mark Lee, chairman of Sysgration Ltd., encountered various obstacles while building the company’s first US factory. High labor costs and bureaucratic red tape were significant hurdles, but he decided to proceed to accommodate an important customer and the US government.

“America knows how to do sales and marketing, but they don’t know how to do manufacturing,” said Lee. Sysgration, which produces components for automotive electronics and energy management, considered several North American locations to increase capacity for an automotive client. Mexico was ruled out due to crime concerns, leading the company to choose Plano, Texas. Despite finding an attractive facility, it took 12 months to obtain sewage system approvals, delaying renovations and equipment installation.

To manage higher labor costs, Sysgration invested $30 million in four automated production lines, each requiring only four workers instead of 20 or 30. This reduced costs to about twice what they would have been in Mexico. Texas officials are working to mitigate such expenses. Jenny Zeilfelder, responsible for attracting international businesses to Plano, ensures companies are aware of the city’s support offerings, including cash grants and property tax rebates. Sysgration will receive a 10% rebate on every dollar invested.

“Not only can he meet with the companies once a week to keep a beat on the pulse on what they’re doing, but he’s also there to assist them with expediting permitting and figuring things out,” Zeilfelder said. Sysgration’s Lee sees progress in Texas. His first factory will be operational later this year, and he plans a second investment there. Delta Electronics Inc, another Taiwanese company, is also expanding in Plano with a 1.5 million-square-foot factory, the city’s largest manufacturing investment.

The surge in US investments has caused some concern in Taiwan. The island prides itself on its critical role in the tech supply chain and fears losing out if too many factories move abroad. Taiwan’s advanced semiconductor production is also seen as a safeguard against potential Chinese control. After TSMC’s $100 billion deal announcement, Taiwan’s President Lai Ching-te held a press conference with TSMC’s Wei to reassure the public.

“This step by TSMC is necessary for future development,” the president said. “The government, in the process of TSMC’s US investment, hasn’t received any pressure from the US.”