AMD embraces pricier us-made chips amid ai boom
Santa Clara, Friday, 25 July 2025.
AMD is willing to pay up to 20% more for chips manufactured in the United States by TSMC. CEO Lisa Su considers domestic production a worthwhile investment. Despite the higher costs, AMD is committed to diversifying its supply chain. The move comes as demand for AI chips surges. This decision highlights the increasing importance of supply chain resilience in the face of geopolitical tensions. The increased cost is offset by supply chain stability. AMD plans to start receiving these chips by the end of 2025.
Tsmc’s arizona expansion and cost factors
TSMC’s expansion in the U.S., particularly in Arizona, marks a significant step in bringing semiconductor manufacturing back to America [1][5]. This move is partly driven by the U.S. government’s push to reduce reliance on Asian chip production [5]. However, this expansion comes at a cost. AMD CEO Lisa Su noted that chips manufactured at TSMC’s Arizona facility could cost 5% to 20% more than those made in Taiwan [1][2][3][4]. These higher costs stem from increased labor expenses, infrastructure investments, and supply chain challenges in the U.S. [4][5].
Impact on tsmc stock and market sentiment
Despite the cost concerns, TSMC’s stock (TSM:NYSE) saw a positive reaction [2]. On July 24, 2025, TSMC’s ADR rose by 2.44% to $240.33 [2]. This increase reflects investor confidence in TSMC’s strategic importance and its ability to capitalize on the growing demand for semiconductors, especially in the AI sector [2][5]. Bank of America Securities had previously raised its target price for TSMC ADR to $290, indicating a strong belief in the company’s future performance [2]. The market recognizes that TSMC’s U.S. expansion is about more than immediate profits; it’s a strategic move for long-term geopolitical positioning [5].
Geopolitical implications and supply chain resilience
The willingness of AMD to absorb higher costs for U.S.-made chips underscores the strategic importance of supply chain diversification [1][4]. Geopolitical tensions and pandemic-induced disruptions have highlighted the risks of relying heavily on a single region for chip manufacturing [1][4]. By establishing production in the U.S., AMD gains a more secure and resilient supply chain, reducing its vulnerability to potential disruptions in Asia [1][5]. This move aligns with the broader industry trend of seeking greater geographical distribution of semiconductor manufacturing [4].
Manufacturing capacity and competitive landscape
TSMC’s Arizona facility has already begun manufacturing 4 nm chips, with production sold out until late 2027 [1]. AMD anticipates receiving its first chips from this facility by the end of 2025 [1][2]. Nvidia is also sourcing some of its Blackwell system production from the TSMC Arizona site [1]. The high demand for TSMC’s U.S. production capacity indicates the strategic importance of having domestic chip manufacturing capabilities [1][5]. This positions TSMC as a key player in the evolving semiconductor landscape, especially amid the AI boom [2][4].
Expert perspectives on cost and sustainability
Experts suggest that the higher costs associated with U.S. chip manufacturing are a short-term issue [1][5]. As the local ecosystem develops and production efficiencies improve, the cost gap between U.S. and Asian facilities is expected to narrow [4]. Government incentives, such as those provided by the CHIPS Act, will also help offset some of the cost pressures [4]. The long-term view is that domestic chip production is essential for technological autonomy and national security, justifying the initial cost premium [5]. This investment ensures that the U.S. remains competitive in the global semiconductor market [1].