Arizona Setbacks: TSMC Struggles With U.S. Regulations While Prioritizing Taiwan's Chip Leadership

Taiwan Semiconductor Manufacturing Company (TSMC), the world's leading semiconductor foundry, is facing challenges in its Arizona expansion plans due to U.S. regulations and labor shortages. Meanwhile, the company continues to prioritize its operations in Taiwan, maintaining its global market share and technological edge. This article explores the geopolitical tensions influencing TSMC's decision-making process and the potential consequences for its Arizona and Taiwan operations.



TSMC's Arizona expansion plans have been impacted by U.S. regulations aimed at preventing advanced semiconductors from reaching China. The Biden administration plans to unveil stricter regulations requiring semiconductor manufacturers to enhance due diligence on their customers and chip designs, targeting advanced chips below a threshold of 14 to 16 nanometers (Bloomberg, 2025). These regulations aim to prevent "backdoor" channels that allow Chinese companies like Huawei to obtain restricted technology. TSMC has already been instructed to halt production of semiconductors at or below the 7-nanometer threshold for Chinese clients (Reuters, 2025).

TSMC's response to these U.S. regulations has been to adjust its operations, severing ties with several entities suspected of facilitating unauthorized chip transfers, including China's Sophgo and Singapore-based PowerAIR (Bloomberg, 2025). The company has also been in close contact with U.S. officials to discuss tax credits and other incentives for its Arizona operations (CNN, 2024).



Taiwan's Ministry of Economic Affairs has lifted the ban on TSMC making 2-nanometer chips at its overseas plants, allowing the company to keep up with global demand and maintain its competitive edge (Taiwan Ministry of Economic Affairs, 2025). This policy change aligns with TSMC's expansion in Arizona, where the company plans to invest over $65 billion and build three factories by the end of the decade (CNN, 2024).

U.S.-China trade tensions have introduced uncertainty across global supply chains, with the U.S. pressuring its allies to decouple from China. Despite this, TSMC has continued to expand its operations in both the U.S. and China. The company's decision to open factories in Arizona and Japan, while maintaining its presence in Taiwan, demonstrates its commitment to balancing geopolitical tensions and maintaining its global market share (CNN, 2024).

In conclusion, geopolitical tensions between the U.S. and China have significantly influenced TSMC's decision-making process, leading the company to adjust its operations, invest in new facilities, and maintain a delicate balance between the two superpowers. As TSMC continues to prioritize its operations in Taiwan and navigate the challenges of expanding in Arizona, investors and stakeholders should closely monitor the company's progress and the evolving geopolitical landscape.