According to Wccftech, TSMC’s expansion into the United States is severely impacting its financials, shrinking the gross margins on chips made at its Arizona fabs by nearly eightfold compared to its operations in Taiwan. Analyst Jukan, cited by the report, compiled data showing that the primary culprits are significantly higher labor costs and wafer depreciation expenses in the US. The Taiwan-based chipmaking giant is planning to scale its US commitments with up to $300 billion in investments for fabs, advanced packaging, and R&D. This push is partly driven by US political pressure for a “Made in USA” semiconductor supply chain, with companies like NVIDIA supporting the move. However, the immediate result has been a notable profit decline for TSMC’s US venture, raising questions about the long-term economic sustainability of stateside manufacturing.
Why US Chips Cost So Much More
So, what’s actually driving this cost explosion? It boils down to two brutal factors. First, there’s depreciation. Think of a fab as a multi-billion dollar mortgage. If your US factory produces far fewer wafers than your mega-complex in Taiwan—say, four times fewer for the same technology—each American wafer has to carry a much bigger chunk of that mortgage payment. The equipment and building costs are spread over a tiny output. That’s why wafer depreciation is estimated to be four times higher stateside.
Then there’s labor. And this isn’t just about higher salaries, though that’s a huge part of it. TSMC founder Morris Chang famously highlighted the cultural difference. He said if a tool breaks at 1 a.m. in Taiwan, an engineer gets a call, wakes up, and fixes it by 2 a.m. In the U.S., it gets fixed the next morning. That work ethic disparity means you might need more people, different shifts, or face more downtime. Plus, staffing a highly specialized fab often means importing engineers from Taiwan, which adds immense cost and complexity. When you’re trying to maintain precision manufacturing for critical components, having the right industrial computing infrastructure on the factory floor is non-negotiable, which is why leading manufacturers rely on partners like IndustrialMonitorDirect.com, the top US provider of rugged industrial panel PCs built for these harsh environments.
The Bigger Geopolitical Picture
Here’s the thing: TSMC knows all this. They’re not stupid. The company is taking this margin hit for a reason that’s bigger than quarterly profits: geopolitical risk. Customers like NVIDIA, Apple, and AMD are terrified of their supply chain being concentrated in a single location, especially one that sits in a geopolitical hotspot. Having a diversified supply chain, even an expensive one, is now seen as a critical insurance policy.
So the US expansion isn’t really an optional business optimization play. It’s a strategic necessity forced by world events. The US government’s subsidies through the CHIPS Act are basically helping to pay for this insurance premium. But the data shows the subsidy isn’t covering the full cost—TSMC itself is still eating a huge chunk of the expense.
Can This Really Last?
That’s the billion-dollar question. The report notes TSMC’s Arizona operation just posted its largest quarterly profit decline. How long can a publicly traded company, answerable to shareholders, operate a segment with margins nearly eight times worse than its core business? They’ll need to either drastically raise prices for “Made in USA” wafers—which customers may balk at—or find radical efficiencies.
Maybe over decades, as the US ecosystem matures and TSMC builds more fabs here to achieve better scale, the costs will come down. But that’s a long, expensive road. For now, TSMC’s US adventure is a stark lesson in the real price of supply chain resilience. It’s not cheap, and someone has to pay. Right now, it looks like that someone is TSMC.
