The Chinese Global Times points out some of the obstacles that are facing the USA’s attempt to bring back the semiconductor industry:
The substantial losses incurred by Taiwan Semiconductor Manufacturing Co’s (TSMC) factory in the US state of Arizona illustrate both the consequences of ignoring market logic and the deep-seated difficulties the US faces in its attempt to forcibly restructure global semiconductor supply chains through political intervention. TSMC’s Arizona facility incurred a staggering loss of nearly NT$14.3 billion ($441 million) in 2024, the largest loss since the establishment of the US factory, Taiwan-based media outlet Economic Daily News reported on Monday, citing TSMC’s latest Annual General Meeting Report to shareholders. By contrast, TSMC’s factory in Nanjing, East China’s Jiangsu Province earned nearly NT$26 billion last year.
This financial disparity goes beyond a simple comparison of operational efficiency; it underscores the challenges of replicating TSMC’s traditional profitability model in the US, a market plagued by high costs and a fragmented supply chain.
TSMC’s Arizona struggles were predictable. It is no secret that the decision to build chip manufacturing plants in the US was never driven by commercial viability but by geopolitical pressure under the CHIPS Act. There are multiple causes for TSMC’s losses in Arizona. While the site has been in volume production since late 2024, the trajectory of financial deficits indicates that its problems are not temporary.
A key factor is the disruption of the supply, industry and market chains. The semiconductor industry is a highly complex and intricate system where upstream and downstream companies are closely interdependent. While the US excels in chip design, it lags significantly behind Asia, especially East Asia, in terms of the complete supply chain needed for manufacturing. TSMC’s Arizona factory relies heavily on importing key components and raw materials, which not only drives up logistics costs but also extends the supply cycle. Any hiccup in the supply chain can lead to production standstills.
All of these issues, problems, and challenges are real. And yet, what is the alternative? There is no alternative, unless the USA is willing to become dependent upon either a self-reliant USSR or the global manufacturing giant China for all of its digital devices?
The point is not efficiency or minimum cost; it’s the misplaced focus on efficiency and lowered costs that created this dilemma for the USA in the first place. The point is national sovereignty, particularly when war is increasingly going to be decided by large-scale high-tech drone manufacturing. It’s important to take market logic into account, but it’s even more important to avoid confusing market logic with national best interest.