TSMC Stock Surges Amid Landmark U.S.-Japan Semiconductor Deal

Intermediate | July 29, 2025

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Strengthening Global Chip Supply Chains

A New Era of “Friendshoring”

A significant new U.S.-Japan trade deal, involving a $550 billion investment agreement, is set to boost the global semiconductor industry, and particularly Taiwan Semiconductor Manufacturing Company (TSMC). This deal is a strategic move to make the semiconductor supply chain stronger and less dependent on just one supplier. It’s part of a bigger plan called “friendshoring,” where allied countries work together to produce important goods. A great piece of news for TSMC is that this financing could also help Taiwanese chipmakers build plants in the U.S., especially if they use Japanese parts or make products for Japanese markets. Japan’s top trade negotiator, Ryosei Akazawa, confirmed this broad eligibility.

This U.S.-Japan chip deal boosts TSMC stock by enabling cross-border investment and unlocking new opportunities for expansion into allied markets.

Investing in the Future of Chips

The U.S. government is actively supporting this initiative. It’s subsidizing up to 35% of construction costs for new chip facilities under the CHIPS and Science Act. TSMC has already made a huge commitment to the U.S., planning to invest \$165 billion in three new factories (fabs) in Arizona, along with two advanced packaging facilities and a major research and development center. One of these Arizona fabs is already working, and the second is expected to begin production in 2028. By the end of this decade, TSMC aims to produce 30% of its most advanced chips in the U.S., a big step towards supply chain resilience.

TSMC’s Strategic Global Expansion

U.S.-Japan Chip Deal Boosts TSMC Stock Performance

TSMC isn’t just focused on the U.S.; it’s also rapidly expanding in Japan. The company opened its first semiconductor production plant in Kumamoto in February 2024, and it began volume production in the second half of 2024, focusing on 12nm to 28nm chips. TSMC plans to build a second plant in Kumamoto, which will raise its total investment in Japan to over $20 billion, though construction delays have pushed volume production to the first half of 2029 due to site congestion and the shift of resources to U.S. fabs. Company executives are discussing the possibility of a third Japanese plant for advanced 3nm chips, potentially costing over $20 billion, but they have not yet confirmed this plan. The Japanese government continues to support the initiative, offering approximately $8.12 billion in subsidies.

Strong Market Position and Outlook

TSMC remains the world’s largest contract chipmaker, holding a dominant 62% of global market share in Q2 2024. The company has a massive market capitalization of \$1 trillion. Its latest quarterly results (ending June 2025) were impressive, beating analyst predictions with a gross margin of 58.58% and a return on equity of 35%. TSMC has even raised its full-year guidance for 2025, now projecting about 30% year-over-year growth. This growth is largely driven by the high demand for AI and high-performance computing (HPC) chips, which made up 60% of end-user demand in Q2 2025. Unsurprisingly, TSMC’s stock has performed very well, rising over 21% year-to-date in 2025 and more than 53% in the last year, with analysts recommending a “Strong Buy.” Both the U.S. and Japan are also collaborating on workforce development, ensuring future talent for this critical industry.

Vocabulary

Deal (noun): A formal agreement or arrangement.
- Example: “The new trade deal is expected to boost the economy.”
Investment (noun): The act of putting money, effort, or time into something to make a profit or achieve a result.
- Example: “TSMC’s investment in new fabs will create many jobs.”
Semiconductor (noun): A substance, such as silicon, that can conduct electricity under certain conditions, used in electronic components like computer chips.
- Example: “Modern electronics rely heavily on semiconductor technology.”
Supply chain (noun): The sequence of processes involved in the production and distribution of a commodity.
- Example: “Strengthening the global supply chain is crucial for stability.”
Reliance (noun): The state of depending on someone or something.
- Example: “The goal is to reduce reliance on a single country for chip production.”
Operational (adjective): Functioning or able to function.
- Example: “One of the new factories is already operational.”
Subsidize (verb): To support an organization or activity financially.
- Example: “The government decided to subsidize the new green energy projects.”
Volume production (phrase): The manufacturing of products in large quantities.
- Example: “The new plant will begin volume production next quarter.”
Market capitalization (noun): The total value of a company’s outstanding shares.
- Example: “People consider the company very valuable with its high market capitalization.”
Consensus (noun): A general agreement among a group of people.
- Example: “There is a strong consensus among analysts to buy the stock.”

Discussion Questions (About the Article)

What is the main purpose of the new U.S.-Japan trade deal regarding semiconductors?
How much is TSMC investing in its Arizona facilities, and what kind of support is it receiving from the U.S. government?
Where in Japan has TSMC established or planned new plants, and what types of chips will they produce?
What are some reasons for the delay in the second Kumamoto plant’s volume production?
How has the demand for AI and high-performance computing (HPC) chips influenced TSMC’s recent financial performance?

Discussion Questions (About the Topic)

Why do you think it’s important for countries to strengthen their semiconductor supply chains?
What are the potential benefits of “friendshoring” for global trade and security?
How might the expansion of major tech companies like TSMC impact local economies in places like Arizona and Kumamoto?
Do you think governments should provide large subsidies to private companies for strategic industries? Why or why not?
How do you think advancements in chip technology affect our daily lives?

Related Idiom

In the black

Meaning: Making a profit; not in debt.
Example: “After several challenging quarters, the company is finally in the black thanks to new investments and strong demand.”

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This article was inspired by: Times of India, July 23, 2025.