NVIDIA: Made in America (by Taiwan)

NVIDIA made a major announcement in its efforts to onshore advanced chip manufacturing to the US this week, by leading (demanding?) its ecosystem of partners to produce its Blackwell products in Texas and Arizona. This move, combined with recent reports that possible export controls on its China-modified H20 chips may no longer be on the table after Jensen Huang attended a Mar-a-Lago dinner, shows that NVIDIA is not only a chip design juggernaut, but also becoming quite proficient in the DC lobbying game! (Update: shortly after this post was published, the Commerce Department informed NVIDIA that it will have to apply for an export license to sell H20s to China “indefinitely”, effectively banning the product. Looks like NVIDIA’s lobbying muscle still has a ways to go.)

Predictably, President Trump lauded the announcement. In both his impromptu Oval Office press conference with President Bukele of El Salvador and later on Truth Social, he praised the effort. He also committed to expediting all necessary permits to help NVIDIA and its partners build quickly – a welcoming sign – never mind the rather misleading “500 BILLION” claim. (Nvidia’s official blog post framed the commitment as “to produce up to half a trillion dollars of AI infrastructure in the United States”, which, to me, reads making $500 billion worth of AI infrastructure products, not making a $500 billion investment, as Trump's post would suggest.)

In the Trump 2.0 era, of course, details have never meant so little, while big, clean, yet misleading numbers take center stage.

That doesn’t mean details don’t matter when rubber meets the road. In this particular case, NVIDIA’s move is on all dimensions very positive for the US. The country badly needs to onshore its supply chain and manufacturing capacities and know-how that are important for its security and innovation. AI chips and servers certainly fit that bill, much more so than shirts and sneakers. Its success could provide a template for others – Apple, car companies, drug makers – to follow, as we brace for tariffs on semiconductors and pharmaceuticals that are, in theory, non-negotiable.

The details that are particularly noteworthy to me are who the NVIDIA partners are – TSMC, Foxconn, Wistron, Amkor and SPIL – and NVIDIA technologies it is looking to deploy and dogfood in the process – Omniverse and Isaac GR00T.

By Taiwan

Of the five partners that NVIDIA called out to make chips-making in America great again, four are rooted in Taiwan. The lone exception, Amkor, traces its roots back to South Korea; the company’s name a mashup of “America” and “Korea”.

Thus, for Blackwell and future NVIDIA products to sport the “Made in America” label, that outcome is entirely dependent on a forced knowledge and technology transfer from Taiwanese companies that is now well underway.

This dynamic isn’t new; it is just happening closer to home.

When Apple realized it needed to diversify its manufacturing away from China five years ago, it looked to India and Vietnam. But since Apple only designs its products and doesn’t manufacture its product, it relied on Foxconn, Wistron, and Pegatron (another Taiwanese company) to do the heavy-lifting – rebuilding their manufacturing capabilities, know-hows, and institutional knowledge in those countries in order to keep making Apple products. Wistron's Indian subsidiary was sold to Tata, an Indian conglomerate, in 2023, so a real Indian company can gain a foothold in the Apple supply chain. But Foxconn has still been the source of the bulk of India-made iPhones, which now accounts for 20% of all iPhones. The same set of Taiwanese companies are now doing the same thing for NVIDIA in Texas and Arizona.

Made in America, by Taiwan.

The on-again off-again, whack-a-mole nature of global tariffs may persist for some time. The only constant is the same set of Taiwanese companies doing the real legwork to re-creating their supply chain and ecosystem to different countries as the geopolitical landscape shifts, not American companies. This includes hiring, training, managing, and up-skilling local American workers, dealing with local unions, attracting local partners (if they exist) to create an ecosystem, and ultimately recreating all the wheels that have been running smoothly for years in Taiwan, the Philippines, South Korea, and other parts of Asia, where they’ve had operations. Assuming Trump’s Truth Social post translates to reality, at least the onerous permitting and regulatory hurdles from local and state governments will be less troublesome.

TSMC has been the tip of the spear of this dynamic, having had to re-constitute a version of itself in Arizona in 2020, during the waning days of Trump 1.0. (Foxconn was supposed to do the same in Wisconsin in 2017, but never followed through.) Readers of this newsletter know very well all the challenges that TSMC has had to face and endure to get its Arizona fabs up and running. Looks like things are better now in TSMC Arizona, or at least not as widely reported. That learning and experience will ideally translate to help Foxconn, Wistron, and SPIL acclimate quicker. Amkor should be helpful too as a Tempe, Arizona-based company.

When Morris Chang, founder of TSMC, pronounced more than two years ago at TSMC Arizona’s tool-in ceremony that “globalization is dead”, he was being rather provocative. If the perfect equilibrium of globalization means each place does what it does best based on its competitive advantage, then globalization, at least as it is reflected in NVIDIA’s announcement, is still alive in a sense. Taiwanese companies, and no one else, are still the ones doing what they do best.

AI-Powered Dark Factory

The relationship between NVIDIA and its Taiwanese partners is not a one-way street, but a symbiotic one. NVIDIA is both a major customer for them and a major source of advanced technology. In fact, NVIDIA plans to dogfood its own technology in its American factories built by Taiwanese firms, as revealed in the last paragraph of the announcement, which few media outlets picked upon, and, least of which, Trump himself:

“The company will utilize its advanced AI, robotics and digital twin technologies to design and operate the facilities, including NVIDIA Omniverse to create digital twins of factories and NVIDIA Isaac GR00T to build robots to automate manufacturing.”

Ominverse is NVIDIA’s suite of tools to build simulated real world environments to accelerate the design and automation of physical spaces, e.g. factories, warehouses, weather systems. Isaac GR00T is its system for building robots to eventually operate in those spaces. In short, NVIDIA intends to fully utilize its own technologies to design, build, and operate its American factories to manufacture its own chips. And what an opportunity it is to use this greenfield opportunity to prove out its ambitions in physical AI, with willing partners from Taiwan who are already customers and users, just elsewhere in the world.

What will we end up with if NVIDIA has its way? I suspect a row of “dark factories” – fully automated factories with no lights on and robots working non-stop – pumping out more GPUs and server racks to enable more dark factories elsewhere.

That may feel like a distant, fanciful future, but dark factories are already appearing though with varying degrees of automation in China, led by the likes of Xiaomi and BYD. Despite youth employment problems, the Chinese government very much supports this ultra advanced mode of manufacturing. In contrast, new American factory projects tend to have commitments to human employment as a must-have ingredient, if only to get enough political support to get the greenlight.

If current trajectory holds, China will have the world’s first fully automated dark factory. This NVIDIA announcement, if executed perfectly with its Taiwanese partners, may be America’s best, if not only, shot of getting its own dark factory.

Pulling that off would be a desperately needed boost to America’s supply chain security and overall manufacturing competitiveness. However, American workers, especially the union workers who in large numbers voted for Trump in 2024, may feel duped and left behind. Let’s just hope when that happens, they won’t be complaining to and blaming their Taiwanese managers, who are simply doing what they have always been doing best.