The United States is pouring billions into domestic semiconductor manufacturing to secure its AI ambitions, but replicating Taiwan's decades-old chipmaking ecosystem could prove far harder than building factories.

Taiwan Semiconductor Manufacturing Co. (NYSE: TSM) has committed $265 billion to its US expansion. The planned buildout in Arizona includes six logic fabs, two advanced packaging facilities and a research and development center. TSMC has indicated that roughly 30% of its 2-nanometer and more advanced manufacturing capacity could eventually be located in the state.

Shay Boloor, chief market strategist at Futurum Equities, cautioned that expanding domestic production does not mean the US can fully replace Taiwan.

"I view the U.S. buildout as a strategic hedge rather than a true replacement for Taiwan," Boloor said.

Advanced Packaging Remains a Major Hurdle

The challenge extends beyond building advanced fabrication plants. Taiwan has spent decades developing a tightly integrated network of suppliers specializing in materials, chemicals, testing and packaging.

Advanced packaging is particularly important as AI processors increasingly rely on technologies such as TSMC's CoWoS (Chip on Wafer on Substrate) to integrate processors with high-bandwidth memory (HBM). Boloor noted that even chips manufactured in Arizona could continue depending on Asian facilities for parts of the final packaging process.

Rather than recreating Taiwan's entire semiconductor industry, Washington is prioritizing capabilities where disruptions could have the greatest consequences, including advanced logic, packaging and domestic capacity to support critical AI infrastructure, the analyst stated.

Taiwan is also expected to remain central to leading-edge research and manufacturing, with TSMC continuing to expand its capabilities on the island.

"Taiwan will still remain central because TSMC continues to keep much of its leading-edge R&D and capacity expansion there," Boloor said.

He continued: "Arizona is being built as an independent leading-edge cluster rather than a duplicate of every supplier and manufacturing layer Taiwan has accumulated over decades."

China-Taiwan Tensions Threaten Global Chip Supply

A major escalation between China and Taiwan remains one of the most significant risks to the global semiconductor supply chain, according to a May 2026 research paper. Potential scenarios range from military exercises and cyberattacks to a blockade or full-scale invasion.

Even without direct damage to chipmaking facilities, disruptions to shipping routes, air cargo, insurance coverage, port operations or workforce mobility could halt semiconductor deliveries. A blockade, in particular, could severely restrict global access to advanced chips, with consequences extending well beyond the technology sector.

Taiwan Resists US Supply Chain Shift

President Donald Trump has argued that the US remains too dependent on overseas chipmakers, fueling his push to expand domestic semiconductor production. He has also weighed new semiconductor tariffs that could hit AI data center servers, laptops and gaming consoles.

In February 2026, Taiwan rejected a US proposal to shift 40% of its semiconductor supply chain to America. Taipei's top tariff negotiator called the plan "impossible."

Analysts have previously said TSMC's planned advanced chip production in Japan would further diversify its manufacturing footprint beyond Taiwan. That step could potentially reduce the chipmaker's exposure to US tariff changes and the risk of a China-led blockade around the island.