Taiwan Semiconductor Manufacturing Co. (TSMC) may be one of the most important companies in the semiconductor supply chain given its customers that use the foundry for its chips, including those in the hyperscale AI sector.
Now it may be getting an exemption from U.S. tariffs, according to a report from the Financial Times.
Under the deal, the U.S. Commerce Department would provide major hyperscalers like Amazon, Google and Microsoft with tariff carve-outs on chips made by TSMC.
The exemption could be part of the result of TSMC’s mega investment of $165 billion for the construction of the first six fabs in Arizona and two advanced packaging facilities. In January, it was reported that TSMC may invest an additional $100 billion in the building of up to five more fabs at the location.
The massive expansion of the fabs in Arizona would allow TSMC to be tariff-free if the Taiwanese giant accelerates the production of its planned fabs, the report said. This would allow more production, and subsequently more chips, to be manufactured domestically in the U.S. rather than having them imported from Taiwan.
The report said that Taiwanese companies including TSMC that invest domestically in the U.S. would be exempt from tariffs in proportion to what they manufacture in America.
Specifically, Taiwanese companies building chip plants in America would be allowed to import 2.5 times the facilities' planned capacities tariff-free during the construction period.
SMIC rising
Despite having been shackled with export restrictions from the U.S. and other European countries, China’s largest pure-play foundry, Semiconductor Manufacturing International Corp (SMIC)., reported a year-on-year increase in the fourth quarter of 60.7% gain in profit.
SMIC’s revenue rose 12.8% to $2.49 billion. Both financial measures beat analysts’ expectations.
Not only is SMIC trying to compete with other global foundries by developing its proprietary semiconductor equipment, but it is also investing in adjacent chipmakers to progress China’s homegrown semiconductor ecosystem.
This includes potential domestic breakthroughs in lithography as well as SMIC looking to expand into its own semiconductor manufacturing as a result.
In February, the company was found to be expanding its production capacity with new land buys for future capacity expansions. The plot of land is adjacent to Semiconductor Manufacturing Beijing Corp., which is backed by SMIC and a Chinese investment fund. The site is likely to focus on the production of 12-inch semiconductor wafers and packaging.
In late December of 2025, SMIC took full control of Semiconductor Manufacturing North China (SMNC) to expand its 12-inch wafer for ICs across numerous sectors. In a separate announcement, SMIC said it has registered capital for another subsidiary, dubbed SMSC, that it will increase to $10.1 billion from $6.5 billion with new and existing investors.
Taiwan says no
According to reports, Taiwan told the U.S. that it would not move 40% of its semiconductor supply chain to the country.
Taiwan’s Vice Premier Cheng Li-chiun labeled it “impossible” after the country has built its ecosystem in its own country as well as abroad. This includes TSMC’s massive fab in Japan, its first fab in Europe and the gigafab being built in Arizona.
While Taiwan is home to the world’s largest chipmaker TSMC, it also houses a variety of other foundries and chipmakers including:
- Hon Hai (Foxconn)
- MediaTek
- United Microelectronics Corp. (UMC)
- Advanced Semiconductor Engineering Technology (ASE)
- Wistron
- Quanta Computing
The comments come after U.S. Commerce Secretary Howard Lutnick said he wanted 40% of Taiwan’s entire chip supply to be relocated to the U.S.
Not the first time they said no
Taiwan and TSMC have been vocal about saying no to suggestions by Lutnick.
In October of 2025, Li-chiun told outlets that it would not agree to a 50-50 split in making semiconductors.
"Our negotiating team has never made any commitment to a 50-50 split on chips,” Li-chiun said to Taiwan’s Central News Agency. “Rest assured, we did not discuss this issue during this round of talks, nor would we agree to such conditions.”
