As a cornerstone of the digital economy and emerging technologies, TSMC has found itself at the center of geopolitical tensions in recent years. Despite significant costs and challenges, the semiconductor giant has strategically expanded its footprint by establishing new manufacturing plants in the U.S., Germany, and Japan. In Kumamoto, TSMC’s high-risk investment aligns with Japan’s economic and industrial objectives, though the company must also navigate the unique challenges of its host country.
The geopolitical landscape in which corporations operate has become increasingly complex and contested. Many of the globalization principles that defined the 1990s and early 2000s are now under scrutiny or outright rejection. The intensifying strategic rivalry between the U.S. and China—two economic superpowers—shapes this evolving global order. In Washington’s view, China has transitioned from a partner to a competitor and, ultimately, an adversary. Meanwhile, Beijing sees the U.S. as a declining power determined to hinder China’s resurgence as a dominant regional force. Advanced technologies, powered by cutting-edge semiconductors, sit at the core of this power struggle.
Only a select few companies produce leading-edge semiconductors. While China is rapidly expanding its capacity for manufacturing older-generation chips used in consumer electronics and conventional automobiles, it remains reliant on external sources for the sophisticated semiconductors required in artificial intelligence, cloud computing, telecommunications, and electric vehicles.
The U.S., along with Japan, Taiwan, and South Korea, maintains dominance in global semiconductor sales and chip design. Determined to secure its leadership, the U.S. employs a mix of geopolitical influence and economic strategies, including forming strategic alliances, implementing policies to boost domestic chip production, and imposing export restrictions to curb China’s access to advanced semiconductors and related technologies.
However, concerns persist over TSMC’s geographic concentration in Taiwan, a region of significant geopolitical risk. The company’s production facilities are deeply embedded within an intricate supply chain that has evolved over decades, making relocation a costly and complex endeavor. Furthermore, Taiwanese regulations restrict the export of TSMC’s most advanced manufacturing technologies, a policy that can be interpreted as a strategic move to secure U.S. military support. TSMC’s presence is central to Taiwan’s ‘silicon shield’—a concept reinforcing the island’s geopolitical importance. While Taiwan seeks to retain TSMC’s operations domestically, other global powers are eager to see the opposite.
In response to these challenges, TSMC has embarked on a series of international investments, including the creation of its subsidiary Japan Advanced Semiconductor Manufacturing (JASM) in Kumamoto, Japan. The company is also constructing new facilities in Arizona, U.S., and Dresden, Germany. This wave of expansion reflects TSMC’s efforts to manage geopolitical risks, safeguard operations, and sustain its leadership in the global semiconductor market.
Japan was once a dominant force in the semiconductor industry, commanding 51% of global sales in 1988. The success of “Japan Inc.”—a model of close government-industry collaboration—helped drive this dominance. However, U.S. pressure to restrict chip exports, coupled with domestic economic shifts and corporate missteps, eroded Japan’s competitive position over time. While Japanese companies have continued sourcing chips externally, rising concerns over economic security in an increasingly tense geopolitical climate have prompted renewed industrial policies to revitalize the sector.
TSMC’s investment in Kumamoto comes at a pivotal moment for Japan. The move supports national strategies aimed at strengthening economic resilience and also contributes to regional revitalization efforts, addressing depopulation trends as young workers migrate to urban centers.
However, Japan’s foreign direct investment (FDI) levels remain lower than those of other advanced economies, with a heavy focus on non-manufacturing sectors. Additionally, Japan’s aging workforce poses a challenge, particularly in securing skilled engineers, raising questions about the country’s ability to maximize the benefits of foreign investment in high-tech manufacturing.
Kumamoto was a strategic choice for TSMC. Located in Kyushu, one of Japan’s four main islands, the region boasts a well-established semiconductor ecosystem. The presence of existing chip manufacturers, proximity to key clients—especially in the automotive sector—strong infrastructure, a stable electricity supply (supported by four nuclear plants), and high-quality water resources all make Kumamoto an attractive site. Moreover, Japan’s experienced semiconductor workforce and generous government subsidies under the regional revitalization strategy further reinforced the decision.
The economic impact of TSMC’s investment is expected to be substantial. Japan’s Ministry of Economy, Trade and Industry projects that JASM’s presence will create approximately 10,700 jobs in the region. Additionally, Kyushu Financial Group’s Higo Bank reports that 72 foreign firms—primarily Taiwanese—have already invested in Kumamoto following TSMC’s move. In contrast to national demographic trends, Kumamoto’s population even saw a slight 0.3% increase between 2019 and 2024.
Ultimately, TSMC’s expansion into Japan represents a convergence of geopolitical strategy and economic necessity. The success of this venture will not only shape Japan’s semiconductor industry and TSMC’s global standing but will also have broader implications for the international semiconductor market and the future of global trade and investment.
