In a recent interview, Advanced Micro Devices Inc. Chief Executive Lisa Su revealed that chips produced at Taiwan Semiconductor Manufacturing Co.’s new U.S. facilities will carry a premium, estimated at more than 5% but less than 20% higher than those made in Taiwan.

This disclosure underscores the trade-offs in diversifying global supply chains amid geopolitical tensions, particularly as the semiconductor industry grapples with reliance on Asian manufacturing hubs.

Su’s comments came during a Bloomberg Television discussion following an AI event in Washington, where she emphasized that the added cost is “worth it” for enhancing resilience. AMD, a key TSMC customer, anticipates receiving its first U.S.-produced chips by late 2025, aligning with broader U.S. efforts to bolster domestic production under initiatives like the CHIPS Act.

The Economics of Onshoring Semiconductor Production

Analysts have long anticipated higher costs for U.S.-based fabs due to elevated labor, energy, and construction expenses compared to Taiwan. A report from Tom’s Hardware earlier this year cited TechInsights findings that wafer production at TSMC’s Arizona facility is only about 10% more expensive, a figure that falls within Su’s range and suggests the premium might be manageable for high-margin products like AI accelerators.

TSMC itself has acknowledged these premiums, with its CEO C.C. Wei stating in 2024 that chips made outside Taiwan, including in the U.S., would command higher prices to offset operational hurdles. This strategy reflects the foundry giant’s cautious expansion, backed by billions in U.S. subsidies, yet it raises questions about competitiveness in cost-sensitive markets.

Strategic Value Amid Geopolitical Risks

For AMD, the diversification is strategic, reducing exposure to potential disruptions in Taiwan, where TSMC produces the bulk of the world’s advanced chips. Su highlighted this in her remarks, noting that while the cost delta is “not insignificant,” it pales against the risks of supply chain vulnerabilities, especially with escalating U.S.-China tensions over technology.

Industry insiders point to similar sentiments echoed in TechSpot, where Su elaborated on the benefits for AI-driven growth, even as higher prices could pressure margins for consumer-grade processors like Ryzen series. AMD’s reliance on TSMC for cutting-edge nodes makes this shift pivotal, potentially setting a precedent for peers like Nvidia and Apple.

Broader Industry Implications and Challenges

The premium pricing could accelerate a bifurcation in the chip market, with premium U.S.-made silicon targeted at defense, AI, and high-security applications, while mass-market production remains in Asia. A Bloomberg analysis underscores how this might slow AI infrastructure buildouts if costs compound across the supply chain, though Su remains optimistic about long-term efficiencies.

TSMC’s Arizona fabs, part of a $65 billion investment, face hurdles like skilled labor shortages, as detailed in prior coverage from Tom’s Hardware. Yet, for AMD, the move aligns with U.S. policy goals, potentially unlocking further incentives.

Looking Ahead: Balancing Cost and Resilience

As production ramps up, the true test will be whether the 5% to 20% uplift erodes in volume or persists, influencing global pricing dynamics. Su’s stance, as reported in PCWorld, positions AMD as a proponent of onshoring, betting that supply chain security outweighs short-term expenses.

Ultimately, this development highlights the semiconductor sector’s evolving priorities, where geopolitical stability increasingly trumps pure cost efficiency, paving the way for a more distributed manufacturing model despite the financial premiums involved.