The news: TSMC chairman Mark Liu announced that the world's largest contract chipmaker has invested 1.86 trillion New Taiwan dollars ($60.4 billion) for new 3-nanometer and 5nm chip production in its factory in Taiwan, per Nikkei Asia.

Why it's worth watching: The new TSMC plant in the Tainan Science Park in southwestern Taiwan has started mass production of advanced 3nm components.

• 3nm chips deliver significant performance and power-efficiency improvements over the 5nm chips currently used as the foundation for Apple, Qualcomm, and AMD products. 
• TSMC says its N3 process will offer up to 70% higher logic density and 15% higher performance while consuming up to 35% less power than the previous generation.
• The race to 3nm is well underway. Samsung announced mass production of its first-generation 3nm chips in July, with plans to start production this year.

A commitment to Taiwan: Liu said that investing in Taiwan will create some 10,000 high-tech jobs and 23,500 construction positions, adding that semiconductors will only become more critical in the tech supply chain over the next 10 years.

• Expansion in Taiwan will include a future 2nm chip plant in the central Taiwanese city of Taichung and, if demand is strong, another one at the northern city of Hsinchu.
• TSMC’s Arizona factory will likely get the 4nm process tech in two years and its 3nm process nearly three years after Taiwan begins production, per The Register.

Diversification in the face of geopolitical conflict: A feared China takeover of Taiwan in any potential reunification initiative by Beijing would have widespread effects on future chip production for TSMC’s international customers.

• In context, Herbert Raymond McMaster, a former national security adviser, cautioned that Chinese President Xi Jinping is “preparing the Chinese people for war.” 
• McMaster said that Xi has “made quite clear” through his recent statements that he is preparing to move against Taiwan and toward “subsuming” the island, per Insider.

What’s next? TSMC is the world’s largest chipmaker by volume and is responsible for fabricating 92% of chips designed by US semiconductor companies, per Stimson. 

• The company is in a unique position in that it can expand in Taiwan as well as in the US and Europe, ensuring continued growth despite the growing threat of fallout from China.
• Diversification allows TSMC to leverage existing US incentives and establish partnerships with American companies, but it may intensify conflict with Beijing.