Taiwan concentration risk

The world still depends on Taiwan for a huge share of its most advanced chips, leaving artificial intelligence servers, phones and cars exposed to one place. (usitc.gov) Taiwan Semiconductor Manufacturing Co. said 3-nanometer chips accounted for 18% of its wafer revenue in 2024, and 3-nanometer plus 5-nanometer plus 7-nanometer chips made up 69% of wafer revenue. Those are the process generations used in many leading smartphone and data-center chips. (investor.tsmc.com) In foundry work, where chip designers hire outside factories, Counterpoint Research said Taiwan Semiconductor Manufacturing Co. held 72% of the global pure-play market in the third quarter of 2025. TrendForce separately said the company’s share reached 67.6% in the second quarter of 2025. (counterpointresearch.com) (trendforce.com) A chip is only partly finished when the silicon wafer leaves the fab. Advanced packaging, which stacks and links chip pieces inside one module, has become a second choke point for artificial intelligence hardware. (cnbc.com) Taiwan Semiconductor Manufacturing Co. said in its 2024 annual materials that it provides advanced packaging services alongside wafer manufacturing, and industry reports say much of its Chip-on-Wafer-on-Substrate expansion is centered in Zhunan, Taichung and Chiayi in Taiwan. That keeps the fabrication step and the assembly step clustered in the same place. (investor.tsmc.com) (kgi.com.hk) That concentration shows up in lead times and prices when supply is disrupted. A March 2024 U.S. International Trade Commission working paper estimated 44.2% of U.S. logic-chip imports were manufactured in Taiwan and found a major Taiwan disruption could raise U.S. logic-chip prices by as much as 59%. (usitc.gov) Taiwan Semiconductor Manufacturing Co. also told investors that earthquakes in April 2024 and January 2025 caused damage to inventories, plant facilities, machinery and equipment, with net losses of about NT$3 billion and NT$5.3 billion. The company did not describe those events as long-term supply failures, but the filing shows how physical shocks in Taiwan can hit output and equipment. (investor.tsmc.com) Governments are trying to spread that risk. The Semiconductor Industry Association said in October 2024 that the United States is projected to reach 28% of global capacity for chips below 10 nanometers by 2032, up from a far smaller base before the 2022 CHIPS and Science Act buildout. (semiconductors.org) Taiwan Semiconductor Manufacturing Co. has joined that shift with new plants in Arizona, but the company’s own 2024 annual report still described Taiwan as its headquarters and core manufacturing base. The supply chain is becoming less concentrated, but it is not yet deconcentrated. (investor.tsmc.com)