Washington’s tariff policies on imported chips have prompted Taiwan Semiconductor Manufacturing Co TSM to postpone the construction of a second plant in Japan and fast-track its U.S. expansion instead. 

In 2024, Taiwan Semiconductor announced plans to build a second facility in Japan’s Kumamoto prefecture as part of a $20 billion investment initiative. The Japanese government pledged over $8 billion in support, the Wall Street Journal reported on Friday.

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Taiwan Semiconductor is a leading supplier to Nvidia Corp NVDA and Apple Inc AAPL supplier. The first plant began chip production last fall, serving major clients like Toyota Motor TM.

Taiwan Semiconductor originally planned to begin construction on the second site earlier this year. However, Chairman C.C. Wei stated in June that heavy traffic in the region had caused a slight delay. There has been no official confirmation from Japan regarding the delay.

Sources familiar with the matter now suggest that the timeline for the second plant remains uncertain, with further delays likely. According to the report, this setback is challenging for Japan, as its economy struggles under President Trump’s 25% tariffs on autos and steel.

Nonetheless, the government expects the factory’s production schedule and output targets to remain unchanged.

The U.S., Japan, Europe, and Taiwan financially supported the Taiwanese contract chipmaker’s global expansion after the 2020 pandemic helped them realize the importance of the semiconductor industry, which is indispensable for electronic devices ranging from a smartphone to a vehicle.

The disruption of the global semiconductor supply chain following China’s pandemic prompted companies to boost their semiconductor base to avoid a semiconductor chip crisis.

In March, Wei announced an additional $100 billion investment in U.S. chipmaking (on top of the $65 billion announced in April 2024).

Price Action: TSM stock is down 2.88% to $228.04 at the last check Monday.

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