Taiwan Semiconductor Manufacturing Company Ltd (TSM  ), the leading contract chipmaker, faces recruitment and production challenges in its Arizona factory.

In contrast, it's growing confident in Japan, where a fab in Kyushu will likely produce chips in 2024. TSMC is considering adding capacity and another fab in Japan for advanced chips.

Successful expansion in Japan could boost the country's chip manufacturing efforts amid regional competition, Reuters reports.

The key Apple Inc (AAPL  ) and Nvidia Corp (NVDA  ) supplier's $40 billion factory will likely be operational by 2024. A second facility nearby will probably make 3-nm chips - to be up and running by 2026.

TSMC's overseas expansion depends on customer needs, government support, and cost considerations.

In Arizona, the chipmaker faces worker shortages and union opposition in migrating workers from Taiwan, delaying production to 2025. Despite challenges, TSMC views Japan favorably due to cultural alignment and government support.

Japan offers a network of chip equipment suppliers, a similar work culture, and proximity to Taiwan.

Japanese workers' willingness to work long hours aligns with TSMC's need for continuous chip production. TSMC's partnership with Japanese companies, including Sony, further supports its Japanese expansion.

While TSMC welcomes Taiwanese workers, it aims to secure local employees by offering higher wages.

The Ministry of Economy, Trade, and Industry (METI) has provided subsidies for TSMC's first fab project and is open to a second fab.

Despite enthusiasm for Japan, TSMC is cautious about rising costs and the macro environment.

Capital spending has surged in recent years, and the chipmaker faces higher-than-expected charges in the U.S. and concerns about the work culture in Germany, where it plans to build a fab.

However, TSMC's leading technology gives it pricing power despite cost challenges.

Meanwhile, the U.S. and China geopolitical tensions continue to escalate as the U.S. imposed semiconductor technology sanctions on the Asian country, restricting its progress.

China has, in recent years, boosted its military presence near democratically governed Taiwan, which China claims as its own. Taiwan strongly rejects China's sovereignty claims.

Price Action: TSM shares traded lower by 0.41% at $90.11 premarket on the last check Wednesday.