In what’s being called the largest foreign investment in U.S. history, Taiwan Semiconductor Manufacturing Company (TSMC) has announced a $100 billion expansion plan to build multiple advanced chip packaging facilities in Arizona. The announcement marks a turning point in the intensifying AI and semiconductor rivalry between the United States and China.

With over 90% of the world’s advanced chips produced by TSMC, this development is more than just economic—it’s geopolitical. The investment aims to fortify America’s supply chain resilience while elevating the U.S. as a critical node in the global AI race.

Why Advanced Packaging Is the New Battleground

While most conversations about chips focus on their fabrication, advanced packaging has quietly become the unsung hero of the AI hardware revolution.

In traditional packaging, semiconductor chips are simply encased and mounted onto a motherboard. In advanced packaging—particularly through techniques like CoWoS (Chips-on-Wafer-on-Substrate)—multiple types of chips (GPUs, CPUs, memory units) are placed in ultra-close proximity, dramatically improving performance, reducing energy use, and slashing latency.

“You’re trying to put the chips as close together as possible,” said Dan Nystedt of TrioOrient. “You’re also putting in different solutions to make the connection between the chips very easy.”

Nvidia CEO Jensen Huang, who has championed the technology’s importance, recently declared, “No one has pushed advanced packaging harder than me.”

The CoWoS Boom: From Underdog to AI Hero

Originally invented by former TSMC executive Chiang Shang-yi in 2009, CoWoS was once a little-used technology due to its high cost. Chiang, at one point, had only one customer and described the internal pressure as immense. But the explosive demand for AI computation—sparked in part by the rise of OpenAI’s ChatGPT—turned CoWoS into a critical enabler of next-gen computing.

“The result was beyond our original expectation,” Chiang said in a 2022 oral history recording.

Today, virtually all leading AI chips, including those from Nvidia and AMD, depend on CoWoS to function in high-performance AI servers and data centers. In fact, CoWoS has become so ubiquitous that in Taiwan, it’s now a household name.

Why This Matters for the U.S.

With advanced packaging now recognized as vital to AI dominance, bringing CoWoS capabilities to the U.S. is a strategic masterstroke. The new facilities will complement existing fabrication plants, giving the U.S. what some experts call a “one-stop shop” for end-to-end chip production.

“It ensures that the U.S. has a complete supply chain from advanced manufacturing to advanced packaging,” said Eric Chen of Digitimes Research.

Notably, this reduces the national security risk of having all advanced packaging operations concentrated in Taiwan—a region under increasing geopolitical strain due to rising tensions with China.

A Global Shift in Semiconductor Sovereignty

TSMC’s expansion isn’t happening in a vacuum. South Korea’s Samsung, Intel, and several OSAT (outsourced semiconductor assembly and test) firms like JCET Group (China), Amkor (USA), and ASE Group (Taiwan) are all ramping up their advanced packaging capabilities.

But TSMC’s Arizona move sets a new precedent. With massive clients like Apple, Nvidia, AMD, Broadcom, and Qualcomm relying on TSMC’s packaging for AI chips, this investment sends a clear message: The U.S. is serious about winning the AI race—not just in software, but in silicon too.

Advanced Packaging is the AI Arms Race’s Secret Weapon

As traditional chip scaling slows and Moore’s Law reaches its limits, advanced packaging has emerged as the lever to keep AI innovation accelerating. What was once an obscure back-end process is now front and center in the world’s most important technological rivalry.

TSMC’s $100 billion bet in Arizona isn’t just about chips. It’s about strategy, security, and the speed of innovation in a world increasingly defined by artificial intelligence. And for the first time, the U.S. may have the tools in place to build the future—chip by chip, layer by layer.