Taiwan Semiconductor (TSM) Stock: Company to Expand U.S. Investment Under Trade Deal

TLDR

• TSMC plans to expand its Arizona investment by building several new plants, potentially reaching a total of about a dozen facilities
• The expansion is part of a trade deal where Taiwan commits over $300 billion in U.S. investment in exchange for lower American tariffs, reducing them from 20%
• TSMC has already pledged $165 billion in U.S. investment and currently has three chip plants planned
• The company’s stock rose 1.18% on Tuesday, helping Taiwan’s Taiex index reach a new high of 30,707.22
• TSMC’s U.S. expansion could challenge Intel’s goal of becoming a leading domestic chip manufacturer

TSMC is preparing to expand its Arizona operations in a major way. The company plans to build several new manufacturing facilities in the state, according to a Wall Street Journal report.

The expansion would bring TSMC’s total number of plants in Arizona to roughly a dozen. This represents a massive increase from its current plans.

Taiwan Semiconductor Manufacturing Company Limited, TSM

The move comes as part of broader trade negotiations between the U.S. and Taiwan. Under draft terms of the deal, Taiwan would commit more than $300 billion in foreign direct investment and other spending in the United States.

In return, the U.S. would lower tariffs on Taiwanese goods. The current 20% tariff rate would be reduced as part of the agreement.

TSMC declined to comment on the report when contacted by Barron’s. The company has already committed $165 billion to U.S. investment, including three new chip plants.

That initial investment came partly due to concerns about China’s territorial ambitions regarding Taiwan. The latest expansion takes those plans much further.

Stock Performance and Market Impact

TSMC’s American depositary receipts have more than tripled in value since late 2023. The rally reflects the company’s position as the dominant manufacturer of advanced chips.

On Tuesday, TSMC’s stock rose 1.18% to close at NT$1,710.00 on the Taiwan Stock Exchange. The gain helped push Taiwan’s benchmark Taiex index to a new high of 30,707.22.

The chipmaker accounts for over 40% of Taiwan’s total market value. Its movement alone pushed the electronics index up 0.61% and the semiconductor index up 1.12%.

TSMC supplies chips to Nvidia, the leader in AI processors. It also manufactures for Nvidia’s main competitors, including Advanced Micro Devices and Broadcom.

Impact on Intel and Suppliers

The TSMC expansion could complicate Intel’s plans to become a leading domestic chip manufacturer. Intel received an $8.9 billion government investment in August to boost its chip-making operations.

TSMC’s increased U.S. presence directly challenges Intel’s position in domestic semiconductor manufacturing. The competition for government support and market share will intensify.

TSMC’s suppliers also benefited from the expansion news. United Integrated Services, a cleanroom builder, jumped 10% to NT$1,080.00.

Marketech International, which provides technology integration support services, rose 7.34% to close at NT$292.50. MediaTek gained 2.77% to end at NT$1,485.00.

Foreign institutional investors bought a net NT$15.74 billion worth of shares on Taiwan’s main board Tuesday. Analysts expect the market to test the 31,000-point level soon.

Investors are looking ahead to TSMC’s investor conference scheduled for Thursday. The company is expected to provide updates on its growth prospects during the AI boom.

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