TSMC’s Arizona Gamble: Keeping Intel as Plan B in America’s Chip Strategy

When Taiwan Semiconductor Manufacturing Company (TSMC) committed to a massive multi stage investment plan in Arizona, the move immediately split opinion back home. Supporters saw access to U.S. subsidies and political protection, while critics worried that the island’s most important strategic asset was being pushed toward a slow motion technology transfer to Washington.

Yet behind the numbers and glossy ground breaking ceremonies, Taiwanese diplomat Roy Chun Lee has outlined a more hard edged reason for the project: if TSMC had stayed out of the United States, the U.S. government might eventually have been forced to throw its full weight behind Intel instead.

In this telling, Arizona is not just another fab site. It is a geopolitical insurance policy. By planting advanced production lines on American soil, TSMC ensures it remains the central character in U.S. industrial strategy rather than watching a historic rival step into that role by default.

Why TSMC Needed a U.S. Address

TSMC’s customer list is dominated by American names. Apple, NVIDIA, AMD, Qualcomm and dozens of smaller chip designers depend on the company for their most advanced nodes. For them, foundry capacity is the lifeblood of their business, not a footnote. A delay at the fab can mean missing an iPhone launch window or losing the lead in the GPU race for an entire generation.

The pandemic era and rising tensions in the Taiwan Strait brutally exposed how fragile that model looks from Washington. U.S. officials were forced to imagine worst case scenarios: a blockade, sanctions or, in the darkest scenarios, a full scale invasion of Taiwan. Online, people jokingly ask “invasion when”, but the underlying anxiety is real. The United States cannot run a modern economy, let alone a high tech military, if its access to leading edge chips can be cut off by events in one narrow stretch of ocean.

If TSMC refused to expand into the U.S., American policymakers still had options. They could double down on Intel, showering it with subsidies, guaranteed contracts and political support until it was capable of replacing a large share of TSMC’s role for U.S. customers. In that world, Intel would be elevated as the flagship of American chip sovereignty, while TSMC would remain a crucial supplier but lose influence over the rules of the game.

The Debate Inside Taiwan

That is exactly the outcome Lee warns against. Many people in Taiwan feel instinctively that the safest move is to keep TSMC’s crown jewel technologies at home. They point out the irony that Washington spent years lecturing Beijing about propping up domestic champions, only to lean on Taipei to send its own champion abroad. For them, building cutting edge fabs in Arizona looks less like global diversification and more like handing leverage to a foreign government that openly pursues a buy American agenda.

But Lee argues that saying no comes with its own risks. If Taipei blocked or heavily discouraged U.S. investments, it would signal to customers and officials alike that TSMC was unwilling to share even a slice of its capacity on U.S. soil. That could erode trust with key clients such as Apple and NVIDIA, who need not only performance but also political predictability. In response, Washington might feel compelled to, in Lee’s words, go all out to support Intel.

Once that pivot happens, it would be extremely hard to reverse. Intel would not just be a backup; it would become the primary strategic partner for the U.S. government, with TSMC recast as an important but ultimately offshore alternative. From Taiwan’s perspective, that would be a dangerous downgrade.

Keeping Intel as Alternative, Not Centerpiece

By promising multiple Arizona fabs and an overall investment envelope often cited around 165 billion dollars over time, TSMC removed a powerful political argument from Intel’s playbook. U.S. officials can no longer say that only Intel is willing to build advanced manufacturing at home. Instead, they can point to both Intel and TSMC as pillars of their onshoring strategy.

The nuance matters. Intel still gets subsidies and headlines, but it is no longer the sole savior of American chipmaking. It has to fight for share as one important supplier among several, competing on cost, performance and execution rather than relying purely on its U.S. passport. TSMC, meanwhile, keeps its grip on the cutting edge, already planning to migrate American fabs toward future nodes such as A16 in the roughly 1.6 nanometer class.

Had TSMC refused to invest, the dynamic would look very different. U.S. chip designers might have been nudged to build more in house production, pay higher tariffs or accept political pressure to move designs to Intel. Over time, that could have chipped away at TSMC’s dominance and loosened the tight coupling between American tech companies and Taiwan’s foundry ecosystem.

Success With Serious Trade Offs

On paper, the Arizona project is a success story. The United States gets more advanced capacity inside its borders, U.S. customers gain a somewhat safer and more diversified supply chain, and TSMC cements its status as an irreplaceable partner in American industrial policy. For Washington, the deal also ties its own interests more tightly to the security of Taiwan, reducing the temptation to treat the island as a distant abstraction.

Yet people in Taiwan are right to feel uneasy. Building fabs in the U.S. costs far more than at home, and training a new workforce from scratch is slow and painful. Engineers worry about brain drain. Ordinary citizens ask who exactly decided that their national champion should shoulder the bill to ease American strategic fears. Some even argue that Beijing missed its window the way Russia did not when it moved on Ukraine, but the very fact that such comparisons are made shows how central TSMC has become in war game scenarios.

In the unforgiving logic of geopolitics, TSMC’s Arizona gamble may still be the least bad option available. By embedding part of its future in the United States while keeping its core in Taiwan, the company makes sure that any serious disruption in its operations would hurt Washington almost as much as Taipei. That shared vulnerability is exactly what Lee sees as the point. Rather than forcing the U.S. to choose between backing Intel or protecting Taiwan, TSMC’s expansion tries to make those interests overlap as much as possible.