TSMC’s chips manufactured in the US cost about 5% to 20% more than those made in Taiwan, mainly due to higher labor costs, expensive import of parts, and the overall higher expenses involved in setting up and running semiconductor fabs in the US. Although some analysts suggest the production cost difference might be closer to around 10%, the CEO of AMD, a major TSMC customer, confirmed at an AI event that the US-made chips are indeed pricier. This price premium reflects broader industry trends as TSMC expands aggressively in the US with a multi-billion-dollar investment, including plans to open a third chip fab in Arizona.
Despite the higher costs, demand for chips, especially AI chips, remains robust and is expected to keep growing rapidly, potentially reaching a market value exceeding $500 billion in the next five years. Firms like AMD continue to place strong orders from TSMC’s US facilities, accepting the higher prices because alternatives are limited, with TSMC and Intel being the primary mass-market chip producers in the US.
Key reasons driving the high US chip cost include:
- Expensive labor relative to Taiwan, although large-scale automation in fabs means labor is a smaller part of total cost (~2%)
- Additional costs from importing parts and specialized equipment into the US
- Higher overheads in establishing and maintaining advanced manufacturing sites under US economic conditions
TSMC is balancing these costs with the strategic benefit of local production under US government pressure to reduce dependence on Taiwan chip imports. The company’s substantial ongoing investment in US fabs, totaling over $165 billion, aims to secure supply chains for leading US tech clients like AMD, Apple, NVIDIA, and Qualcomm.
While the cost increase presents challenges, the AI chip market’s growth momentum remains strong, with industry leaders emphasizing that demand will outpace these cost pressures, meaning innovation and production capacity will continue to expand despite the higher price of US-produced chips.
This synthesis uses insights from AMD CEO Lisa Su’s remarks and major industry reports on TSMC’s US manufacturing cost structure and market outlook as of mid-2025.