TSMC Weighs Texas Expansion and Rare-Earth-Free Motors to Reduce Supply Risks

Preface

With demand for AI chips continuing to exceed supply, Taiwan Semiconductor Manufacturing Company (台積電, TSMC; 2330-TW) is assessing ways to expand its manufacturing presence in the United States. In addition to its existing investment plans in Arizona, the company has sent a team to Texas to explore potential factory sites. At the same time, tighter Chinese export controls on rare-earth materials have prompted TSMC to ask equipment suppliers about components that do not rely on rare-earth materials, particularly motors used in automated wafer-fab equipment. These developments reflect two distinct efforts: expanding production capacity and reducing exposure to supply-chain disruption. Both remain under evaluation. TSMC has not confirmed a Texas facility, selected a rare-earth-free motor supplier, or announced broad deployment of alternative motors.

Lazy bag

TSMC is exploring a possible expansion in Texas and discussing Elon Musk’s Terafab chip-manufacturing proposal, while remaining open to cooperation or holding an interest in related facilities. Separately, it has begun early-stage discussions with equipment suppliers about rare-earth-free motors. China’s export controls, in force for certain rare-earth materials, magnets, and processing technologies since 2025, have made supply resilience a more prominent consideration. No large-scale motor adoption has been announced, and precision-equipment qualification remains a key hurdle.

Main Body

On October 22, 2026, a report by UAnalyze’s Industry Data Center said that TSMC is assessing further expansion of its U.S. manufacturing footprint as AI chip demand continues to outstrip available supply. The company already has investment plans in Arizona, and it has also dispatched a team to Texas to look for possible factory locations. The reported search signals that TSMC is considering additional geographic options, but it does not amount to a confirmed decision to build a Texas plant. No location, investment amount, construction schedule, or production capacity for a Texas facility was specified.

TSMC Chairman and CEO C.C. Wei (魏哲家) confirmed that the company is in discussions regarding Terafab, a chip-manufacturing proposal put forward by Elon Musk. Wei said TSMC is open to participating in cooperation or holding an interest in related manufacturing facilities. That openness indicates that the company is willing to discuss possible forms of involvement; it does not establish that an agreement has been reached, that TSMC has committed capital, or that a specific facility will be developed under the proposal. The discussions should therefore be viewed as exploratory until the company provides further details.

The reported U.S. expansion assessment is taking place alongside a separate supply-chain review. TSMC has approached equipment suppliers to ask about the feasibility of using motors that do not require rare-earth materials. According to the report, this work remains at an early stage, and the company has not begun large-scale adoption. Nor has it named a chosen product or supplier. The inquiry is relevant because motors are part of the moving and drive systems used in automated factory equipment, including systems found in semiconductor fabrication plants.

Rare-earth magnets are widely used in industrial motors. For semiconductor factories, the issue is not limited to a motor’s material composition: automated equipment depends on the reliable operation of components and on the availability of replacement parts and servicing. China has imposed export controls on certain rare-earth materials, magnets, and processing technologies since 2025. Those restrictions introduce potential uncertainty for equipment supply chains that depend on affected inputs. If a fab cannot obtain a critical motor component when required, equipment repair could be delayed and production-line operations could be affected. The report describes this as a potential risk, rather than a confirmed disruption at TSMC.

Alternatives to rare-earth-magnet motors are already commercially available for some industrial uses. ABB, Siemens, WEG, and Nidec have continued to expand their product offerings in synchronous reluctance motors. The report says these products can reach the IE5 ultra-high-efficiency level and are used mainly in equipment such as industrial pumps, fans, and air compressors. This existing commercial use offers a basis for evaluating the technology, but it does not demonstrate that the motors are automatically suitable for every semiconductor-fab application. Operating requirements vary by machine and process, and qualification must be assessed in the intended equipment.

Taiwan-based TECO Electric & Machinery (東元, 1504-TW) has also mass-produced high-efficiency synchronous reluctance motors that do not use rare-earth magnets. The report says the motors are already used in utility water pumps at electronics factories and have been sold in European and American markets. These examples indicate that rare-earth-free motor designs are not merely theoretical. However, the reported applications are in industrial or facility systems, and they do not establish that the motors have been qualified for precision semiconductor process equipment.

Market estimates provide additional context for the technology’s development. Research firm Mordor Intelligence projects that the global synchronous reluctance motor market will grow from US$195 million in 2024 to US$240 million in 2030, at a compound annual growth rate of approximately 3.63%. The figures point to projected expansion, though they do not measure the portion of the market attributable to semiconductor manufacturing. Historically, companies have adopted these motors primarily to improve energy efficiency. With increased uncertainty around rare-earth supplies, reducing dependence on rare-earth magnets is emerging as another factor in equipment procurement decisions.

For TSMC, the central question is whether available alternatives can meet the demanding specifications of semiconductor manufacturing equipment. Current rare-earth-free motors are used mainly in industrial machinery and factory utility systems. Precision process tools may require exacting control, stable operation, and high reliability. A motor that performs well in a pump, fan, or air compressor may still need redesign, testing, or extensive validation before it can be used in a more sensitive application. Equipment manufacturers must also assess how a substitution affects system-level performance, maintenance procedures, and operating consistency.

TSMC’s supplier discussions are therefore an initial assessment rather than evidence of an imminent transition. The company has not confirmed which products it may adopt, which manufacturers it may work with, or whether any alternative motor will be used in production equipment. Subsequent design work and equipment validation will determine whether rare-earth-free options can meet the relevant requirements. The timing and outcome of that process remain uncertain.

Taken together, the Texas site search, Terafab discussions, and motor inquiry reflect different approaches to managing future manufacturing needs. Exploring additional U.S. locations may offer TSMC further options for capacity planning, while evaluating motor alternatives addresses potential dependence on rare-earth-related supply chains. Neither effort has been described as a finalized commitment. For now, the key developments are TSMC’s willingness to explore these options and the practical qualification work that would be needed before either expansion plans or equipment substitutions could move forward.

Key Insights Table