Taiwan's tech giants are grappling with rising costs and logistical hurdles as they follow TSMC into the US, responding to pressure from Washington to localize advanced semiconductor manufacturing. While TSMC pushes forward with its Arizona fabs, Taiwanese server makers—including Foxconn, Quanta, Wistron, Gigabyte, and Asus—are facing high setup costs, labor shortages, and union negotiations as they ramp up their US operations.
TSMC chairman C.C. Wei has openly described the emotional toll of building the Arizona facility as "a mix of tears and snot." Despite the setbacks, TSMC announced in March, alongside US President Donald Trump, a fresh US$100 billion investment plan. The expansion will add three additional wafer fabs, two advanced packaging facilities, and a research center to its US roadmap, piling on pressure amid global scrutiny and mounting expectations.
The company's challenges in Arizona are multifaceted. While it managed to achieve mass production in late 2024, progress has been slowed by a shortage of skilled local engineers and the high cost of importing construction labor from states like Texas. Training US workers unfamiliar with TSMC's production protocols has proven difficult, with Wei pointing to a decade-long gap in US semiconductor facility development as a key hurdle.
Navigating complex US regulations has also cost TSMC roughly US$35 million in consulting fees just to align its operations with local requirements. The company is incurring steep logistics costs as critical chemical materials must be imported from Taiwan, where prices are significantly lower, sometimes five times cheaper than domestic US alternatives. Union involvement and local administrative red tape are further weighing down efficiency at the Arizona site.
Meanwhile, TSMC's strategic pivot is reshaping Taiwan's AI server supply chain. Companies like Foxconn and Wistron are following Nvidia's lead as it commits up to US$500 billion in AI infrastructure spending across the US over the next four years. TSMC's Arizona fabs are expected to produce Nvidia's latest Blackwell chips on a 4nm process, tying the future of Taiwan's server giants more closely to US manufacturing policies.
Foxconn's Houston facility and Wistron's Dallas plant are scheduled to begin large-scale AI server production within 12 to 15 months. Other firms—including Compal, Pegatron, Inventec, and Quanta—are also laying the groundwork for new US operations. However, the financial burden of this transition is uneven.
While TSMC's gross margins hover near 60%, offering strong pricing power and long-term stability, Taiwanese contract manufacturers operate on much thinner margins. With US plant setup costs estimated to be at least 50% higher than in Taiwan, these companies face significant financial stress.
Despite differing views within the market, industry sources argue that TSMC's US buildout—although costly—could pay off in the long term by reducing Taiwan's energy supply risks and helping secure American clients through geopolitical alignment and tariff advantages. Others remain cautious, warning that the massive scale of investment could pressure TSMC's profitability.
As the US doubles down on reshoring advanced chipmaking, Taiwan's tech supply chain is being redrawn, forcing firms to balance political realities with economic viability.
Article edited by Jack Wu
