Taiwan Semiconductor Manufacturing (TSMC) is reportedly delaying the construction of its second plant in Japan partly so that it can focus on accelerating funding for its U.S. expansion ahead of the Trump administration tariffs. According to a Wall Street Journal report, people familiar with the matter have confirmed the link between the delay and potential trade concerns.
The Trump administration has threatened to impose a tariff of up to 100% on semiconductor imports in an effort to incentivize domestic production. TMSC seems to be taking this threat seriously as it reassesses the timeline for its overseas projects. The company is now prioritizing a massive $100 billion expansion of its Arizona operations in order to further strengthen its presence in the U.S.
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Traffic congestion had been earlier cited as a reason for the delay. The first TMSC plant in Japan has been operational since last year, and while it boosted the local economy, it also strained rural infrastructure, leading to housing and service shortages and extended commute times. “We have created too big an impact on the local traffic. I have experienced that in person. For what used to take a 10-15 min drive, it now takes almost an hour,” CEO CC Wei told Bloomberg.
The company’s latest decisions align with the strategic goals of the U.S. government, which is aggressively promoting domestic chipmaking through legislation like the CHIPS and Science Act. The U.S. government is also offering billions of dollars in subsidies to semiconductor manufacturers that establish U.S.-based facilities
Sources told the WSJ that while Japan remains an important ally and strategic manufacturing location for TMSC, its current priority is securing U.S. support and avoiding trade measures that could significantly raise its production costs. The company said its investment decisions have come after a consideration of several different factors including customer needs, government incentives, operating efficiency, and cost structures, rather than tariffs alone.
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Meanwhile the U.S. might curb semiconductor imports to Malaysia and Thailand due to concerns about those semiconductors ending up in China. A draft rule from the Commerce Department reportedly seeks to prevent China — to which the U.S. has effectively banned sales of Nvidia’s advanced AI processors — from obtaining those components through intermediaries in the two Southeast Asian nations.
Aside from these Malaysia and Thailand controls, officials are also planning a formal rescission of global curbs from the so-called AI diffusion rule, according to people familiar with the matter. That framework from the end of President Joe Biden’s term drew objections from U.S. allies and tech companies including Nvidia. Washington would maintain semiconductor restrictions targeting China as well as more than 40 other countries covered by a 2023 measure, which were designed to address smuggling concerns and increase visibility into key markets.