HSINCHU, Taiwan - Silicon Valley may be the heart of global tech, but its pulse depends on a special kind of lifeblood — high-end microchips — many of which flow out of a science park on Taiwan's west coast.
The park has been home to Taiwan Semiconductor Manufacturing Company, or TSMC, since the company's inception nearly four decades ago. It is from this base that TSMC made itself indispensable to modern life; its chips are in everything from cell phones to cars. By some estimates, it produces over 90% of the world's most advanced chips.
But the calculus has been shifting for Taiwan's biggest and most profitable company, as the U.S.-China rivalry has intensified and chips have come to be seen as strategic to U.S. national security because of their applications in military technologies and artificial intelligence.
Beijing has also been dialing up political pressure on Taiwan; TSMC's headquarters and much of its chipmaking infrastructure lie less than 100 miles from China across the Taiwan Strait. The semiconductor industry has long been considered a "silicon shield" that ensures Taiwan's safety.
These geopolitical forces are pushing the company to look abroad — at least partly — for its future.
TSMC Chief Financial Officer Wendell Huang describes it primarily as a question of meeting customer demand. "As a company, all we can do is focus on our fundamentals: technology leadership, manufacturing excellence, and then the customers' trust. We don't know politics. That's between the governments," Huang told NPR in an October interview at the company's headquarters.
But politics have shaped the landscape.
Currently, many of the company's customers, which include equipment suppliers, chip designers and hardware companies like Applied Materials and Qualcomm, have offices in the science park that surrounds TSMC's facilities in Taiwan. This lets them be close to their chip supplier.
But now, TSMC is making moves to get closer to its customers. In 2020, TSMC announced that it planned to build fabs, or semiconductor fabrication plants, in Arizona, as pressure began to build in the United States to "reshore" chipmaking that had moved abroad, including to Taiwan. The first fab there ramped up to high-volume production late last year.
In Arizona, the company has plans for a total of six semiconductor fabs, two advanced packaging facilities (where chips are combined into sets), and a research and development center. It is expanding its footprint in Japan and Germany, too.
"Seventy percent of our revenue is from the U.S., and most of these customers want advanced technology," Huang said. "Therefore, we are expanding in Arizona the advanced technology fabs."
The Biden administration's CHIPS Act took concrete steps to incentivize a build out of chip production — and keep high-end chips out of China's hands. The Trump administration has continued apace in his second term, deploying carrots and sticks to try to get companies to make chips in the United States. In September, the U.S. government took a 10% stake in chipmaker Intel, and earlier this year chipmaker Nvidia agreed to give the U.S. 15% of the Chinese sales of its advanced H20 chip.
Asked if pressure from the Trump administration was a factor in TSMC's expansion into Arizona, Huang said it was a function of demand.
"Let me put it this way, we're also expanding, or speeding up, our Arizona fab," he said. "We're trying to upgrade to more advanced technologies faster. And those are all because of customers' choice, customers' demand."
That demand is for made-in-the-USA chips — and it's through the roof.
In mid-October, TSMC reported that in its latest quarterly revenue was up over 30% from the same period last year and profits leapt almost 40%. A key driver was the company's high-performance computing division — responsible for chips used in artificial intelligence.
"We do observe a very positive or even stronger demand for AI products," Huang said, adding that the company believes the "megatrend" will continue.
Hundreds of billions of dollars have been invested in AI data centers, and trillions more are projected. Those data centers rely on chips made by TSMC.
Huang said TSMC's business model is well suited to current conditions. TSMC pioneered the "pure play foundry" model of chip manufacturing. That means it does not design its own chips. Instead, firms like Apple, Sony and Nvidia — which have no chipmaking capacity — outsource production to TSMC.
Huang says that model, and the fact that TSMC is a technological leader, has built a reservoir of trust with the company's more than 500 customers. And that, he said, puts TSMC in a good position for whatever may come.
"The good thing about foundry in our business with 500 customers is that you cast a wide net. You don't know who's going to be the winner in the next 10 years or 20 years," he said. "But basically you are serving all of them, the potential winners."
Huang said TSMC's moves abroad are also about tapping into new pools of talent and having room to grow — accessing tracts of open land, and supplies of water and power.
"This is a small island. Resources are limited. So we need to expand overseas," Huang said.
As its business abroad grows, the company will continue to invest in Taiwan, though, and keep some cutting edge technology and research here.
"We will still have a home base in Taiwan," he said.
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