Taiwan Semiconductor Eyes US Expansion Amid Push for Bigger Investments and Advanced Chip Production

Taiwan President Lai Ching-te plans to invest more in and trade more with the U.S. while ramping up defense spending to assuage President Donald Trump's concerns over the chip industry.

Taiwan is home to the leading contract chipmaker Taiwan Semiconductor Manufacturing Co TSM, a major supplier to companies including Apple Inc AAPL and Nvidia Corp NVDA, and a crucial part of the developing AI industry.

Taiwan Semiconductor is investing $65 billion in new factories in the U.S. state of Arizona.

Also Read: Taiwan Semiconductor's Trillion-Dollar Valuation: The Chipmaker Enabling AI Boom

Apple remains the largest customer of Taiwan Semiconductor's U.S. operations.

Trump had been critical of Taiwan for allegedly undermining U.S. manufacturing of semiconductor chips, including the lack of a formal defense treaty between the Chinese-claimed Taiwan as its most significant international backer and arms supplier.

Taiwan also has a large trade surplus with the U.S., which surged 83% last year. The island's exports hit a record $111.4 billion, driven by demand for high-tech products such as semiconductors.

Trump has threatened to impose 100% tariffs on Taiwan-made chips, prompting market speculation that Taiwan Semiconductor might consider boosting its chip capacity in the U.S., ramping up production of advanced chips at its Arizona fabs, or building its advanced packaging capacity in the U.S.

Reports also indicated Trump's plans to scrap the U.S.CHIPS and Science Act, where Taiwan Semiconductor is a significant beneficiary.

Ching-te highlighted the importance of the global semiconductor supply chain being an "ecosystem," Reuters cited from a National Security Council meeting.

He urged democratic nations, including the U.S., to build an international alliance for AI chips and a "democratic supply chain" for advanced chips. After that, Taiwan proposed to come up with good proposals and engage in further discussions with the U.S.

On Wednesday, Taiwan Semiconductor held its first board meeting in the U.S. The board approved a proposed cash dividend distribution of NT$4.5 per share on an EPS of NT$14.45, implying a payout ratio of 31.1%.

It also approved capital appropriations of $17.14 billion to meet long-term capacity plans.

Taiwan Semiconductor would spend the capex on installing and upgrading advanced technology process capacity, advanced packaging, fab construction, and installation of fab facility systems.

Taiwan Semiconductor stock surged over 56% in the last 12 months. Investors can gain exposure to the stock through VanEck Semiconductor ETF SMH and iShares Semiconductor ETF SOXX.

Price Action: TSM stock traded lower by 1.69% to $198.40 premarket at the last check on Friday.

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