TSMC and Amkor Technology have locked in a 10-year memorandum of understanding to build out advanced semiconductor packaging and test services in Peoria, Arizona. The deal pairs TSMC’s wafer fabrication capabilities with Amkor’s back-end packaging expertise, creating something closer to a full domestic chip supply chain than anything the US currently has.

What the deal actually covers

The MoU, originally signed on October 4, 2024, focuses on co-locating advanced packaging operations near TSMC’s Phoenix-area wafer fabrication plant. The logic is straightforward: chips get made at TSMC’s fab, then travel a short distance to Amkor’s facility for packaging and testing, instead of being shipped across the Pacific.

The collaboration targets several of TSMC’s most advanced packaging technologies, including Integrated Fan-Out (InFO) and Chip on Wafer on Substrate (CoWoS). These are the packaging methods that power the most demanding applications in AI, high-performance computing, automotive systems, and mobile devices.

CoWoS in particular has been a bottleneck technology. It’s the packaging method used in Nvidia’s most advanced AI accelerators, and global demand has consistently outstripped supply.

Amkor’s Peoria facility was initially projected as a $2 billion investment. That number has since ballooned to $7 billion, reflecting both the scale of ambition and the expanding scope of what the site will handle. Production is expected to commence in 2028, with the facility anticipated to create up to 2,000 jobs.

The CHIPS Act connection

The TSMC-Amkor partnership is directly tied to the broader reshoring push under the CHIPS and Science Act, the landmark 2022 legislation designed to reduce America’s dependence on Asian semiconductor manufacturing.

Without domestic packaging capacity, chips fabricated in Arizona would still need to be shipped overseas for finishing, which defeats much of the purpose of onshoring fabrication in the first place.

Apple, Nvidia, and AMD are all named as beneficiaries of the strategic alignment between TSMC and Amkor. Apple in particular has been a driving force behind TSMC’s Arizona expansion, publicly committing to purchasing chips made at the Arizona fabs.

What this means for investors

For Amkor specifically, the trajectory is notable. The company has historically operated in the shadow of larger players, running packaging and test facilities primarily in Asia. A $7 billion US facility represents a significant strategic pivot, one that positions Amkor as an essential partner in the domestic semiconductor ecosystem.

TSMC’s decision to pair with Amkor rather than build its own packaging capacity in Arizona suggests a preference for speed and specialization over vertical integration.

Advanced packaging technologies like CoWoS are essential for the multi-chip architectures powering the current generation of AI accelerators, and any expansion of CoWoS capacity directly addresses one of the tightest bottlenecks in the AI hardware supply chain.

Taiwan produces the vast majority of the world’s most advanced chips, and the cross-strait tensions with China add a layer of uncertainty that no amount of financial modeling can fully capture. Every chip that gets fabricated and packaged on US soil is one less chip exposed to that risk.