TSMC commits $265B to Arizona, adds advanced packaging; US still ships chips to Taiwan for CoWoS

TSMC announced a $265 billion commitment to Arizona on July 16, 2026, expanding its Phoenix fabrication capacity and adding dedicated advanced packaging facilities. Despite this unprecedented investment, the company will continue shipping all AI accelerators made at TSMC Arizona to Taiwan for CoWoS (Chip-on-Wafer-on-Substrate) advanced packaging before customer shipment, a gap expected to persist for at least two more years.

Advanced packaging is the finishing step that connects all logic and memory chips into a functional AI system. CoWoS is the industry standard for GPU packaging. TSMC's Arizona packaging operation is targeting 2029 for production start, while third-party vendor Amkor Technology — working with Apple and NVIDIA — is targeting its Arizona facility for early 2028 production. That two-year window leaves the US dependent on Taiwan for the critical final step of AI chip assembly.

This reveals the packaging blind spot at the center of US semiconductor sovereignty strategy. The $53 billion in CHIPS Act direct funding catalyzed massive fab expansion domestically, but the rush to build wafer fabs treated advanced packaging as an afterthought. The European Union faces the same gap in its Chips Act strategy, per a 2025 European Court of Auditors report.

For architects and policy: the bottleneck in AI supply chains is no longer wafer capacity — it is packaging throughput. Until domestic packaging capacity scales, US-made chips remain dependent on Taiwan for final assembly, even if the silicon is cut in Arizona. This is the defining supply-chain risk of the AI era.