The Chip Challenge: Innovation, Rivalry, and Reshoring

By Clear Perspective Advisors on August 7, 2025

The Semiconductor Race

The semiconductor industry has rapidly emerged as one of the most competitive and strategically vital sectors in the global economy. At the forefront of this race are two dominant players: Taiwan Semiconductor Manufacturing Company (TSM) and Samsung Electronics (SSNLF), both vying for technological leadership and market share. The innovations driven by these companies are shaping the future across a wide range of applications, from smartphones and consumer electronics to artificial intelligence (AI) and advanced industrial systems. Semiconductors, the essential components behind electronic chips, power everything from mobile devices and computers to automobiles and manufacturing equipment.

TSM continues to lead the global semiconductor market, but Samsung remains a formidable competitor, working to close the gap. A recent breakthrough for Samsung came with a $16.5 billion agreement to supply Tesla with its next-generation AI6 chips. These chips will be deployed across Tesla’s humanoid robots, AI data centers, and vehicles, signaling a major expansion of Samsung’s presence in advanced chip applications. The deal is expected to account for approximately 8% of Samsung’s 2024 revenue, highlighting its strategic significance. Notably, Tesla CEO Elon Musk referred to the $16.5 billion figure as a minimum commitment, suggesting that actual production volumes could be substantially higher. For Samsung, the partnership secures a high-value client and leverages its U.S.-based manufacturing capacity, while Tesla benefits from a reliable supplier capable of streamlining its supply chain. TSM remains the dominant force, but Samsung’s aggressive push into AI and automotive chips reflects its ambition to narrow the gap. In such a competitive and saturated industry, strategic partnerships and innovation remain critical to maintaining an edge.

Rapid advancements in artificial intelligence, electric vehicles, and data center infrastructure are fueling unprecedented demand for semiconductors. One of the most dynamic segments is the AI chip market, which was valued at approximately $53 billion in 2024. Forecasts suggest this figure could surge to nearly $296 billion by 2030, reflecting a staggering compound annual growth rate (CAGR) of over 30% over the next five years. This explosive growth underscores the critical role semiconductors will play in enabling next-generation technologies and highlights the sector’s long-term investment potential.^[1]

Chart 1: AI Chip Market Size^[2]

The Current State of Semis

Taiwan Semiconductor Manufacturing Company (TSM) has long held a dominant position in the semiconductor fabrication space, largely due to its highly advanced technology and consistently high production yields. In contrast, Samsung Electronics has faced ongoing challenges in matching TSMC’s efficiency, particularly in the production of advanced chips. Samsung’s lower yield, meaning fewer functional chips per wafer, has constrained its output, increased manufacturing costs, and made it more difficult to attract high-volume orders.

TSM’s superior yield rates have enabled it to capture a significant share of the advanced chip market, securing partnerships with major tech leaders such as Apple (AAPL), Nvidia (NVDA), and Advanced Micro Devices (AMD). In the summer of 2025, TSMC made notable progress in cutting-edge semiconductor processing, reportedly achieving a nearly 90% yield on its 3-nanometer (nm) chips, far ahead of Samsung’s estimated 50% yield. This performance gap has further solidified TSMC’s competitive edge, allowing it to command premium pricing and deepen relationships with high-profile clients.

Both TSM and Samsung are now racing toward 2nm technology, signifying a significant leap in miniaturization and performance. 2nm chips offer the potential to improve speed and power consumption compared to their 3nm counterparts. 2nm chips are expected to be 10-15% faster than 3nm chips at the same power level, while also reducing power consumption by 30% compared to 3nm.^[3] Currently, TSM yields 60% on its 2nm production, while Samsung yields 40%.

TSM’s leadership remains optimistic about the year ahead, projecting strong growth in 2025. The company expects its “advanced technologies”, defined as 7nm process nodes and below, to contribute approximately 80% of its wafer revenue next year. Demand for 3nm-class production is particularly robust, driven by next-generation smartphones and cloud-based AI accelerators. Meanwhile, Samsung has acknowledged the need to improve its chip yields and win back key clients. The recent partnership with Tesla is seen as a potential catalyst for this turnaround, offering both a high-profile endorsement and a pathway to reestablish its competitiveness in cutting-edge semiconductor manufacturing.

Onshoring Semiconductor Production

Despite the strategic importance of semiconductors, the United States remains heavily reliant on imports to meet domestic demand, particularly from Taiwan. According to estimates from the U.S. International Trade Commission, approximately 44.2% of U.S. imports of the most advanced logic chips originate from Taiwanese manufacturers. This dependency highlights a key vulnerability in the U.S. supply chain, especially as geopolitical tensions and global competition continue to intensify.^[4]

The COVID-19 pandemic exposed critical vulnerabilities in the global semiconductor supply chain, leading to widespread shortages and highlighting the urgent need for a more resilient and self-sufficient manufacturing base in the United States. In response, the U.S. government enacted the CHIPS and Science Act, an initiative aimed at revitalizing domestic semiconductor production. The legislation allocates approximately $280 billion over ten years, with $50 billion earmarked specifically for semiconductor manufacturing, research, and development. Its goals are multifaceted: to strengthen supply chain resilience, reduce reliance on foreign suppliers, spur innovation, and create high-skilled jobs across the country.

One of the Act’s most ambitious targets is to increase the U.S. share of global leading-edge chip production to around 20% by 2030, a significant leap from its current near-zero contribution. Progress is already underway. As noted earlier, Samsung’s recent $16.5 billion deal with Tesla includes plans to manufacture AI6 chips at its fabrication facilities in Texas. This partnership not only validates the strategic intent of the CHIPS Act but also helped unlock stalled investment, as Samsung had previously delayed opening its Texas facilities due to a lack of committed customers. With Tesla now on board, the project gains momentum, reinforcing the U.S.’s push to secure its semiconductor supply chain.

Beyond Samsung, other major players like Intel (INTC), TSM, and Micron (MU) have announced multi-billion-dollar investments in U.S.-based fabs, with new facilities planned in states such as Arizona, Ohio, and New York. These developments mark a pivotal shift toward reshoring critical technology infrastructure and reducing exposure to geopolitical risks, particularly in East Asia, where much of the world’s advanced chip production is currently concentrated.

^[1] Carbon Credits, As of June 2025.
^[2] Source: Precedence Research, As of July 2025.
^[3] Science Alert, As of April 2025.
^[4] Council on Foreign Relations, As of April 2024.