Two Numbers, One Story

TSMC Arizona's profit rose 662.8% year over year in 1H26. In the same breath, Q2 profit fell 8.2% quarter over quarter as depreciation pressure built.

Both are true and they aren't in tension. The site is ramping, so year-over-year comparisons look spectacular against a near-zero base. Sequentially, the capital cost of that ramp is now landing on the P&L.

TSMC has been direct about the structural piece: overseas expansion dilutes gross margin by 2 to 3 percentage points in early stages.

What That Means for a Cost Model

Localization does not automatically mean lower conversion cost. That's the sentence worth taking away, because a lot of 2027 sourcing strategy quietly assumes the opposite.

A domestic fab shortens your logistics chain and reduces geopolitical exposure. Those are real and worth paying for. What it doesn't do, at least during ramp, is make the wafer cheaper. Early-stage overseas capacity carries ramp inefficiency and depreciation that someone pays for, and it isn't the foundry.

So if you're modelling a US-sourced wafer at parity with a Taiwan-sourced one, check where that assumption came from. The supplier's own margin commentary points the other way.

The Same Pattern in Critical Minerals

The US Department of Energy selected nine critical-minerals recovery projects totalling $162 million on August 19, covering scandium, copper, antimony and rare earth elements.

Same shape as Arizona: genuine, funded, and years from output. These are bench- and pilot-scale projects. They widen the medium-term option set without changing near-term supply.

The consistent lesson across both is that domestic capacity is a decade-scale answer being offered to a quarter-scale problem. Useful to support, useless to plan against.

What Buyers Should Do Now

  1. Check one assumption: Find any 2027 model that prices US-sourced wafer or material at parity with offshore, and ask where the number came from. Early-stage domestic capacity runs 2 to 3 points dilutive on gross margin.
  2. Separate the two benefits: Price supply security and unit cost independently. Reshoring buys the first and, during ramp, charges you for it.
  3. Keep the horizons apart: Track domestic capacity announcements for medium-term planning, and keep them out of your next four quarters entirely.