Taiwan Semiconductor Manufacturing (NYSE: TSM) is one of the most powerful companies in the globe. It's the world's biggest contract manufacturer, handling production for some of the most important tech companies like Apple, Nvidia, Broadcom, and Advanced Micro Devices.

The company dominates the market in third-party chip manufacturing with an estimated market share of 62% -- and around 90% for advanced chip manufacturing. As a result, TSMC is a linchpin in the global economy and a major player in the artificial intelligence (AI) boom.

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That's helped drive its valuation above $1 trillion after the company posted strong third-quarter results. In addition, Taiwan Semi just shared some news that shows its global diversification strategy is paying off.

TSMC's Arizona plant is on track

Taiwan Semi's base in Taiwan is seen by many as the biggest risk to the company, as a Chinese invasion of the island is one of many geopolitical risks investors have in the back of their minds. Diversifying away from Taiwan is key to reducing its growth and geographic risk.

The company just shared that production yields at its first plant in Arizona are better than those at comparable plants in Taiwan, ahead by 4 percentage points. (This means that the percentage of usable chips produced is 4 percentage points higher.) That's significant for TSMC on multiple fronts. First, it will help the company unlock $6.6 billion in grants from the CHIPS Act and an additional $5 billion in loans as it has two more factories planned for that location, which are slated to open by the end of the decade.

The production improvements also show that the new plants should be able to deliver strong margins for TSMC as manufacturing errors could put a significant dent into margins and will shorten the payback period for the plant. The new Arizona fab is reportedly already producing chips for Apple.

Finally, the news puts more distance between Taiwan Semi and two of its closest rivals, Samsung and Intel, which both faced challenges in recent months. Samsung apologized to investors in its earnings report earlier this month as delivery of key memory chips was delayed. Intel, meanwhile, announced a massive restructuring in August and made its foundry into a subsidiary, which could allow it to raise outside funding as its earlier guidance for the foundry division now seems in jeopardy.

Is TSMC a buy?

TSMC already has over a dozen fabs around the world, including at its subsidiaries, but its business is growing rapidly, and the promise of AI should fuel continued growth through the rest of the decade. After all, the U.S. passed the CHIPS Act because it recognized the strategic importance of semiconductors and had to ensure adequate chip supply, especially with tensions with China around Taiwan.