To build a non-red semiconductor supply chain, TSMC stays in Taiwan and expands its global layout

2025/05/29

TechNews Technology News
May 19, 2025
Author Central News Agency Zhang Jianzhong

The US-China trade war has been raging since 2018, and the semiconductor industry has become the core of the two powers' struggle. After Trump returned to the White House in January, he used various policies such as tariffs to encourage technology giants such as TSMC to expand their investments in the United States. The US "re-industrialization" policy is gradually disintegrating the global division of labor established by the United States itself over the past decades, and has also increased the challenges of restructuring Taiwan's semiconductor supply chain, which has been developing for half a century.

After President Lai Ching-te took office in May last year, the international environment has changed dramatically in the past year. Taiwan's semiconductor industry, led by TSMC, has become the focus of global attention. US President Trump has mentioned more than once in public that "Taiwan has stolen the US chip business." President Lai responded to the Taiwanese people's mood and situation by saying "Taiwan only earns hard-earned money. Although Taiwan has advantages in the semiconductor industry, it does not have semiconductor self-esteem." This allows countries including the United States to understand that Taiwan regards semiconductors as global assets, and President Lai also uses various policies to assist the industry to build Taiwan's non-red (non-Chinese) semiconductor supply chain.

TSMC leads the overseas layout of the supply chain with Taiwan as the axis

At the beginning of the US-China trade war, customers asked Taiwan's industrial chain to "China + 1" (that is, to establish production lines outside of China). Many Taiwanese companies moved their Chinese production lines to Vietnam, Malaysia, Thailand and India. However, in recent years, the industrial chain has been further required to "Taiwan + 1", that is, to establish production lines outside of Taiwan. The huge supply chain faces the problem of re-migration.

Semiconductor manufacturers have launched diversified layouts in recent years to meet customer requirements. TSMC has invested in factories in Phoenix, Arizona, USA and Kumamoto, Japan. The first wafer fabs in both places have been mass-produced by the end of 2024. TSMC also plans to build a wafer fab in Dresden, Germany. The production capacity will expand to the three continents of the United States, Asia and Europe, providing local production capacity for customers.

US President Trump and TSMC Chairman and President Wei Zhejia went a step further and jointly announced at the White House in early March this year that TSMC will invest at least $100 billion in the United States. TSMC's total investment in the United States is expected to reach US$165 billion, and the expansion of investment includes the construction of three wafer fabs, two advanced packaging facilities and a major R&D team center.

In addition, in addition to Taiwan's Hsinchu Science Park and Southern Taiwan Science Park, UMC's current production bases also have factories in China, Japan and Singapore; among them, Singapore's Phase 3 wafer fab (P3) was put into use in early April this year and is expected to start mass production in early 2026. UMC also cooperated with Intel on the 12nm technology project to increase customers' choice of American manufacturing.

World Advanced and NXP have jointly established VSMC to build a 12-inch wafer fab in Singapore, which is expected to be mass-produced in 2027 and reach a monthly production capacity of 55,000 pieces in 2029. After the first 12-inch fab goes into mass production, World Advanced and NXP will evaluate the construction of a second wafer fab.

Wafer fab overseas plant construction faces challenges of cost, manpower and cultural differences

Faced with geopolitically driven overseas investment and plant construction plans, TSMC expects to face considerable challenges in the expansion process and operations, including cost increases, establishing raw material supply chains and ecosystem support in multiple overseas locations, attracting and retaining talent in overseas operating locations, and even construction problems, insufficient industrial land, and cyber attack risks. It must also face challenges from different employment environments and labor laws.

Liu Peizhen, research director of the Industrial Economic Database of the Taiwan Institute of Economic Research, analyzed that the challenges faced by manufacturers in overseas layout are cost increases, especially the higher production costs of European and American factories; there is also a shortage of talent, because the current semiconductors in the United States are mainly designed, and there are very few manufacturing aspects, and there is a need to adjust to the differences in work culture.

Liu Peizhen believes that not all semiconductor factories are as capable as TSMC to invest in the United States. Currently, most Taiwanese semiconductor suppliers choose Japan for overseas layout because the Japanese government provides subsidies and assistance, and the geographical location and work culture are similar to Taiwan.

Therefore, some supply chain manufacturers have successively gone to Japan for layout. Among them, the carrier solution provider Den held a groundbreaking ceremony for its Kurume plant in Japan in April this year. In the future, it will produce masks and wafer carriers locally and provide carrier cleaning services. It will not only serve Japanese customers, but also simultaneously support the needs of global customers, improve service speed, and reduce the risk of material shortages for key customers.

Regarding investment in Japan, Chia-Teng Chairman Qiu Minggan said that because customers require off-site backup, Chia-Teng decided to set up production bases outside of Taiwan and China. Malaysia and Thailand were both evaluated locations during the process, and Japan was finally finalized after careful consideration. He said that Chia-Teng did not want to set up a factory in the United States, but mainly considered culture and regulations, and decided to expand the US market through an alliance.

Chia-Teng's considerations are not unreasonable. Liu Peizhen pointed out that the Taiwanese manufacturers that are currently following semiconductor manufacturers to set up in the United States are mainly engineering factory operators, as well as silicon wafer and semiconductor channel operators.

GlobalWafers builds silicon wafer fab in Texas TSMC continues to invest in advanced processes in Taiwan

GlobalWafers' new 12-inch silicon wafer fab in Texas, USA is an example. It started mass production on May 15. After completing his trip to Washington, D.C., Minister of Economic Affairs Kuo Chih-hui also went to Texas to attend the opening ceremony of the new factory. GlobalWafers currently has 18 production and operation bases in 9 countries in the Americas, Europe and Asia. In the current situation of emphasizing local supply, it has become GlobalWafers' competitive advantage.

However, GlobalWafers' expansion of overseas layout is also facing the impact of increased costs. Due to the increase in depreciation expenses and labor costs caused by the expansion plan, GlobalWafers' gross profit margin in the first quarter of this year fell to 26.4%, a decrease of 3.7 percentage points from the fourth quarter of 2024.

In addition, Fanxuan, a high-tech industrial plant and process system planning and integration service company that TSMC built a factory in the United States, suffered an operating loss of more than NT$850 million in its US subsidiary last year, which also affected its gross profit margin and profit performance; however, operations improved in the first quarter of this year, with a gross profit margin of 11.02%, an increase of 0.67 percentage points from the fourth quarter of 2024, and a net profit of NT$888 million attributable to the parent company, a record high, with net profit per share of NT$4.41.

Based on Fanxuan's experience, expanding its overseas layout cannot avoid the pain of increased costs, but it can create new opportunities for future operational growth.

TSMC's plan to expand its overseas investment has repeatedly caused concerns that Taiwan's semiconductor industry advantages may be weakened. Wei Zhejia made it clear at the Presidential Office press conference that expanding investment in the United States by US$100 billion will not affect Taiwan's production lines. TSMC will build 11 production lines in Taiwan this year alone, but it is still not enough and must continue to build. Wei Zhejia has repeatedly emphasized that TSMC's advanced process research and development must be in Taiwan.

In fact, TSMC recently held a 2-nanometer expansion ceremony in Kaohsiung, making a big move to declare its determination to continue to deepen its roots in Taiwan. Even if it continues to invest overseas, Taiwan is still TSMC's advanced process production base, and the Guardian Mountain is still the Guardian Mountain.

Related link: https://technews.tw/2025/05/19/tsmc-increase-layout/
Image source: shutterstock

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