AI Supply Chain Overseas Manufacturing: Taiwan’s Capabilities Are Being Invited Abroad

30-second overview: Overseas manufacturing in the AI supply chain is not simply “moving out” or “selling out Taiwan.” It is what happens after the world comes to need Taiwan’s manufacturing capabilities. Companies want to stay close to customers and markets; governments want to lower the risk of being held hostage by supply bottlenecks; people care about jobs, wages, water, power, and local life; foreign partners want key capacity in places they can more directly manage. TSMC is the most visible leader, but the move abroad also includes AI servers, racks, power systems, networking, packaging and testing, fab facilities, and components. Taiwan is needed, so it is invited out; Taiwan is too concentrated, so it is also being distributed.

In 2025, NVIDIA spread a Taiwanese supply chain across a map of the United States.

It announced that Blackwell chips were already being produced at TSMC’s Phoenix fab, while AI supercomputers would be manufactured by Foxconn in Houston and Wistron in Dallas; packaging and testing also involved SPIL and Amkor in Arizona.¹ This was not the first time Taiwanese companies had gone overseas, but it clearly showed what had changed in the 2020s: foreign customers do not only want Taiwan to know how to make things. They also want key hardware to be made in places they feel they can control.

For a long time, the ideal of globalization was simple: make things wherever they can be made best, cheapest, and fastest. Taiwanese companies grew up in that world. Taiwan took orders. China’s coastal regions handled mass manufacturing. Southeast Asia supplied labor and land. The United States and Europe held brands, customers, and markets. Japan, the Netherlands, and Korea guarded materials, equipment, and memory. This division of labor made products cheaper, and it taught the world to place efficiency ahead of security.

Then several things happened together. COVID-19 turned chip shortages into factory shutdowns. The US-China technology war turned chips into a national-security issue. Russia’s invasion of Ukraine reminded countries that energy and supply chains can be weaponized. AI then turned computing power into a new symbol of national power. In the past, everyone asked, “Where is most efficient?” Now they also ask, “If something happens there, will I be held hostage?”

That is the background to overseas manufacturing in Taiwan’s AI supply chain. Behind any one company’s overseas expansion is a world pulling supply chains back from “lowest cost” toward “controllable, trusted, and negotiable.”

TSMC fabs in Hsinchu Science Park. Overseas manufacturing begins from the fact that this dense domestic manufacturing capacity is both needed by the world and seen by the world as something to diversify. Photo: Tseng Cheng-Hsun. CC BY 2.0 via Wikimedia Commons.

From Globalization to De-Risking

Overseas manufacturing is not new. Taiwan’s electronics industry has long been used to moving with customers, wages, land, and tariffs.

After the 1990s, many Taiwanese electronics contract manufacturers placed large amounts of capacity in China. The logic then was globalization: customers needed scale, low cost, and on-time delivery; China provided land, labor, ports, local-government coordination, and complete supplier clusters. Taiwanese companies acted as intermediaries among management, engineering, process improvement, and global customers.

After the 2020s, however, the reason for going abroad changed. Companies were not only chasing lower costs; they were also spreading risk. American customers wanted products manufactured in the United States or friendly countries. India, Vietnam, Thailand, and Mexico offered assembly bases outside China. Japan and Europe wanted to reconnect semiconductors with automotive and industrial supply chains.

This shift is often called de-risking. It does not necessarily mean complete decoupling, and it does not mean every country will make everything by itself. It is more like taking a chain that has become too concentrated and too dependent on one location, then splitting it into several backup nodes.

For Taiwan, this is a subtle moment. Taiwanese companies grew through globalization. Now they are being pushed to redistribute by de-risking.

AI Pushes Hardware Supply Chains Across Borders

AI makes overseas manufacturing more urgent.

A large AI system is not only cloud software. It needs GPUs, CPUs, HBM memory, advanced packaging, substrates, cooling, power, network switches, racks, data centers, and large amounts of electricity. These hardware systems are bulky, power-hungry, expensive, and often tied to national security, data sovereignty, and energy security.

So customers do not only ask, “Can Taiwan make it?”

They also ask, “Can it be made somewhere I feel safer?”

In its announcement about US manufacturing, NVIDIA said it had commissioned more than one million square feet of manufacturing space in Arizona and Texas. Blackwell chips were already being produced at TSMC’s Phoenix fab; AI supercomputer manufacturing would be handled by Foxconn in Houston and Wistron in Dallas; and packaging and testing would involve Taiwan’s SPIL and Amkor in Arizona.¹

The list is revealing. Wafer fabrication, packaging and testing, server systems, racks, and testing were all placed inside the narrative of “American AI infrastructure.” TSMC was only the most visible name.

TSMC Fab 21 under construction in Phoenix, Arizona. Overseas manufacturing eventually lands in places where factories, water, power, workers, local society, and supply chains all have to operate together. Photo: Hunter Trick. CC BY-SA 4.0 via Wikimedia Commons.

OpenAI and Foxconn later announced a partnership to design and manufacture AI data-center racks in the United States, including cabling, networking, and power systems. AP reported that Foxconn would use US facilities in Wisconsin, Ohio, Texas, and elsewhere.² This makes overseas manufacturing more than chip production; the entire AI data-center hardware system is being pulled into domestic manufacturing.

Taiwan’s AI supply chain does not move abroad along one route. Different segments are pulled by different markets: chips and packaging are pulled by national security and cloud customers; servers, racks, power, and cooling move with data centers, tariffs, and delivery needs. A Taiwan.md Contributors self-made diagram.

Why Taiwanese Companies Often Face Outward

Taiwan’s domestic market is too small to sustain large hardware companies on its own.

Taiwanese companies often grow by receiving international customer demand and turning themselves into world-class suppliers. TSMC serves global chip-design companies. Foxconn, Quanta, Wistron, Compal, and Pegatron serve global brands and cloud customers. Delta makes power, cooling, and energy-management systems. ASE and SPIL handle packaging and testing. A group of fab-facility, materials, electromechanical, equipment, and component companies move with major customers.

This gives Taiwan’s supply chain one special feature: it works for the world, while Taiwan’s local market is only a small part of the story.

When the world believed in globalization, this was an advantage. Taiwanese companies knew how to manage across borders, build factories quickly, respond to customers, and mobilize suppliers. When the world began de-risking, it remained an advantage, but the problem became harder. Customers do not only want Taiwanese companies to know how to make things. They want them to reproduce the same quality and speed in the United States, Mexico, India, Vietnam, Thailand, Japan, Germany, or elsewhere.

So “going abroad” does not simply mean moving a factory. It is also a renewed proof of capability: can the engineering management, supplier coordination, and manufacturing tempo formed in Taiwan be replanted inside another system of laws, languages, unions, power prices, water resources, and labor cultures?

One Overseas Factory, Different Stakeholders

Overseas manufacturing is easily written as corporate news: which company invested how much, where it built a plant, when it will enter mass production, and whether revenue will rise.

That is certainly the first issue for business owners. For companies, going abroad is business: move closer to customers, avoid tariffs, obtain subsidies, spread China risk, and build a second production base under pressure from major customers. If an overseas plant helps the company win orders, retain customers, and enter government procurement, business owners naturally see it as a growth strategy.

But a government sees something else in the same plant.

For the governments of the United States, Japan, and Europe, overseas manufacturing by Taiwanese companies is understood as economic security. The US CHIPS and Science Act subsidy for TSMC Arizona was intended to bring advanced chip production onto US soil and reduce dependence on Asian supply. When AP reported that the US government would provide up to US$6.6 billion in subsidies for TSMC, it placed the news in the context of rebuilding US leading-edge chip manufacturing capacity and supply-chain security.³

For Taiwan’s government, the issue is subtler. In an interview with TIME, President Lai Ching-te said on one hand that semiconductors are a globally divided industry, with raw materials, equipment, and technology spread across the United States, Japan, the Netherlands, and other countries. On the other hand, he said that if semiconductor companies, based on their own interests and development, choose to expand into the United States, Japan, Europe, or elsewhere, the government respects that in principle.⁴ This means the government cannot view overseas manufacturing only as “staying in Taiwan” or “leaving means loss.” It has to balance corporate growth, international alliances, and domestic core capabilities.

People and Foreign Partners Are Watching Too

The public sees another set of questions.

In Taiwan, people may ask: if the most important fabs and orders slowly move outward, will jobs in Taiwan decrease? Will wages stagnate? Will the protective effect of the sacred mountain weaken? But the public may also benefit in another way: if overseas manufacturing brings companies more orders, research, management roles, and international cooperation, Taiwan headquarters may retain higher-level work instead of keeping all the pressure over water, power, land, traffic, and housing prices on the island.

In overseas manufacturing locations, people ask different questions: do these high-tech investments really bring good jobs? Can local communities afford the water, power, transportation, housing, and environmental risks? When The Verge reported on Arizona’s semiconductor cluster, it placed expectations for jobs alongside concerns over water resources, chemicals, worker safety, and whether local residents would truly benefit.⁵ That is a reminder that after Taiwanese companies go abroad, they encounter not only foreign customers, but also foreign local societies.

Foreign suppliers and partners see the matter differently again. NVIDIA, OpenAI, Sony, Denso, Toyota, Bosch, Infineon, and NXP work with Taiwanese companies because Taiwan fills a capability gap inside their own supply chains. Cooperation helps them move closer to compute, automotive, industrial, or data-center markets, and it also lowers single-point dependence. To them, Taiwanese companies are partners and part of risk management.

So overseas manufacturing should not only ask, “Did the company make money?” It also asks: what sense of security does a government gain, what costs do people bear, what backup do foreign partners obtain, and what core capabilities remain in Taiwan?

Going Abroad Is Not Copying One Taiwan

Going abroad is easily imagined as “moving the same factory to another country.” But for manufacturing, buying land, building a factory, and installing equipment are only the beginning. The truly difficult part is bringing an entire working culture into a new place.

In Taiwan, one phone call can reach familiar materials suppliers, electromechanical contractors, equipment-maintenance teams, logistics providers, and engineering support. Suppliers know each other’s speed, and they know who can fill the gap when something goes wrong. That density belongs to an industrial cluster, and it is the tacit knowledge that many companies have built over time.

Overseas, companies have to face different labor markets, union systems, environmental-review procedures, local politics, electricity prices, water prices, engineering talent pools, and supplier maturity. Some problems can be solved with money. Some require time. Some even change the original management method.

This is why the difficulty of going overseas differs sharply by segment. AI servers, racks, power, cables, and assembly can more easily move with customers and data centers. Wafer fabrication and advanced packaging depend more heavily on supplier density, engineer training, and long-term yield learning. The world can use subsidies to invite Taiwanese companies out, but it cannot immediately copy Taiwan’s domestic speed.

For that reason, evaluating overseas manufacturing cannot only look at “where capacity is.” The more important questions are: where are decisions made, where is R&D located, where is problem-solving capability, can suppliers keep up, and where will the next generation of technology first be made? These questions decide whether going abroad extends Taiwan’s capability or slowly moves the core elsewhere.

Not Every Segment Goes Abroad the Same Way

Different parts of the AI supply chain go abroad for different reasons.

Wafer fabrication has the highest capital threshold and involves water, power, land, talent, equipment, chemicals, and yield. It is difficult to move, and it is the easiest segment for politics to notice. Advanced packaging and testing sit in the middle; they must be close to wafers, customers, and system integration. AI servers, racks, and power systems are closer to final data centers and are more sensitive to tariffs, delivery schedules, customer locations, and national-security procurement.

That is why different companies move in different directions.

Foxconn and Wistron have been pulled into US AI-supercomputer manufacturing. Delta is expanding overseas sites in power, data centers, and industrial power equipment. Media have reported that after expansion, its Plano, Texas campus is planned to reach nearly 1.5 million square feet and provide US local manufacturing solutions; its Krishnagiri plant in India is also expanding to serve electric-vehicle, telecom, data-center, and industrial customers.⁶⁷

Wafer and packaging/testing nodes such as TSMC, ASE, and SPIL enter US, Japanese, and European semiconductor policy more directly. Their overseas manufacturing is meant to convince customers and governments that even if Taiwan remains the core, part of the capability can land inside allied territory.

The Sacred Mountain Raises the Stakes

TSMC is the most visible actor in this story, but supply-chain overseas manufacturing does not stop with TSMC.

As the symbol of Taiwan’s “sacred mountain protecting the nation,” TSMC pushes the overseas-manufacturing question to its highest intensity. This is the most complex, expensive, supply-chain-dependent form of wafer manufacturing, and it is being asked to land inside allied countries. Once that happens, other segments are even less likely to remain entirely on the island.

TSMC’s official Arizona page says its Phoenix investment has expanded to US$165 billion and is planned to include six fabs, two advanced-packaging facilities, and an R&D center. One fab began N4 volume production in the fourth quarter of 2024, with later plans for N3, N2, A16, and other technologies.⁸ This is a representative case of the United States pulling part of advanced AI chip manufacturing capability onto its own soil.

Kumamoto, Japan, represents another demand. AP reported that TSMC plans to produce 3-nanometer chips at its second Kumamoto fab for AI, smartphones, robotics, and autonomous driving. Japan values economic security and the reconnection of semiconductors with its automotive, robotics, materials, and equipment industries.⁹

ESMC in Dresden, Germany, follows a third logic. ESMC’s official site says it is a joint venture among TSMC, Bosch, Infineon, and NXP, intended to build a fab in Germany to support Europe’s industrial, IoT, communications, and automotive markets.¹⁰ Europe’s concern is supply resilience for automotive, industrial-control, and communications chips, not catching Taiwan at every node.

The United States, Japan, and Germany do not want the same thing from overseas manufacturing. The United States wants AI and national security. Japan wants industrial rebuilding. Europe wants industrial resilience. TSMC, meanwhile, becomes the clearest international interface of Taiwan’s supply chain among these demands.

What Remains in Taiwan After Going Abroad?

The real question is: after capability goes abroad, what remains in Taiwan?

Some things can be moved relatively quickly: factory buildings, parts of production lines, assembly capacity, customer service, local maintenance, some testing, and logistics. Some things are difficult to move: supplier density, engineer training, process-improvement speed, yield culture, cross-company coordination, long-term trust, and the shared knowledge of who to call when something goes wrong.

Taiwan’s core value will not disappear immediately just because several overseas plants appear. But it will not automatically last forever either.

Overseas manufacturing creates two opposite effects. First, it embeds Taiwanese companies more deeply in allied markets and strengthens shared interests. Second, it lets allies gradually build backup capacity and reduce single-point dependence on Taiwan itself. Business owners see growth, governments see security, foreign partners see backup, and the public sees both opportunity and anxiety.

Both are true at the same time.

Taiwan therefore cannot treat overseas manufacturing only as loss, and it cannot treat it only as glory. It is a stress test: if Taiwanese companies carry capabilities abroad, can Taiwan itself continue to retain higher-level R&D, processes, packaging, engineering density, talent, and supplier networks?

If the answer is yes, going abroad becomes extension. If the answer is no, it may become dilution.

Needed, and Distributed

Overseas manufacturing in Taiwan’s AI supply chain makes the phrase “Taiwan is irreplaceable” more complicated.

The world does need Taiwan. But the world is also using subsidies, policy, land, water, electricity, tariffs, and markets to make itself less unable to live without Taiwan.

This is the inevitable counterforce that appears after Taiwan’s success. When one island becomes a key node in the global AI supply chain, other countries naturally want to pull part of that capability closer to themselves.

What Taiwan must do next is make sure the world still needs Taiwan after Taiwanese companies go abroad. Overseas factories can grow in the United States, Japan, Germany, India, Vietnam, Thailand, or Mexico, but core capabilities must keep renewing in Taiwan.

That “renewal” is concrete. Taiwan has to keep the people who can stabilize new processes, solve packaging bottlenecks, hold server delivery schedules, and allow suppliers to fill gaps quickly. If those capabilities keep accumulating, Taiwan will continue to be where the next round of solutions appears. As long as the next difficult problem still comes back to Taiwan first, overseas manufacturing looks more like extending Taiwanese capabilities than hollowing Taiwan out.

That is the most important question in AI supply-chain overseas manufacturing: after Taiwan’s capabilities are invited abroad, can Taiwan itself keep growing the next layer of capability?

Further Reading

• AI Hardware Supply Chain — Why the world needs Taiwan to turn cloud demand into machines.
• AI Hardware Supply Chain — How Taiwanese ODM / EMS companies carry AI data-center hardware from GPUs to racks.
• Taiwan’s Electricity and Semiconductors — How advanced manufacturing returns to electricity and energy security.
• Semiconductor Water Use and Taiwan’s Water Resources — How fabs enter reservoirs, drought, and reclaimed-water governance.
• Taiwan’s TSMC — How TSMC’s foundry model reshaped global semiconductor division of labor.
• Foxconn Precision Industry — From electronics contract manufacturing to AI servers and data-center hardware.
• Delta Electronics: Taiwan’s Power Giant — How power, cooling, and energy management became part of AI infrastructure.
• Science Park Development — How Taiwan’s semiconductor clusters grew out of land and cities.

Image Sources

• Aerial view of TSMC Arizona Fab 21 under construction (hero / inline): 231105-1 TSMC Fab 21 construction — Photo: Hunter Trick, 2023-11-05, Wikimedia Commons, CC BY-SA 4.0. This article uses the cached version at public/article-images/economy/tsmc-fab21-arizona-2023.webp.
• TSMC fabs in Hsinchu Science Park: TSMC fabs in Hsinchu 01 — Photo: Tseng Cheng-Hsun, 2020-01-02, Wikimedia Commons, CC BY 2.0. This article uses the cached version at public/article-images/economy/tsmc-fabs-hsinchu-2020.webp.
• AI supply-chain overseas manufacturing roadmap: A Taiwan.md Contributors self-made SVG diagram, CC BY-SA 4.0, stored at public/article-images/technology/ai-supply-chain-overseas-footprint.svg. It explains the multiple routes and stakeholder pulls behind Taiwan’s AI hardware supply chain going abroad, and does not represent complete company distribution or capacity share.

References