Recently, at the Morgan Stanley 2025 TMT conference, TSMC Chief Financial Officer Huang Renzhao had an in-depth exchange with analysts, revealing the company's latest strategic layout in the global semiconductor industry.
At its core, there are many hot topics around TSMC's $100 billion expansion plan in the United States, the sustainability of AI demand, the expansion of CoWoS production capacity, and a potential cooperation with Intel.
An additional $100 billion will be invested in the United States
Jingtai sees TSMC's expansion plan in the U.S. as an important step in its globalization strategy, but also faces challenges such as cost pressures and margin dilution. According to media reports, TSMC plans to invest "at least" $100 billion more in the United States to build a "state-of-the-art" chip production facility. At the recent TMT conference, TSMC executive Huang Renzhao made it clear that the expansion plan has always been guided by customer needs. At present, TSMC's first 4nm fab in the United States has entered the stage of mass production, and the construction plans of fabs 2 and 3 may even be advanced. In the long run, once all six fabs are completed, the U.S. capacity will account for 20%-30% of the world's N2 and below processes.
TSMC expects overseas factories, especially in the U.S., to have a 2%-3% dilution effect on their overall profit margins over the next five years. Production costs at U.S. factories are significantly higher than those in Taiwan Province, mainly due to their smaller size, higher labor costs, and the imperfect supply chain ecosystem. However, Huang stressed that cost pressures will gradually ease as production scales up and the ecosystem matures. In the long term, TSMC aims to maintain a gross margin of more than 53%, a goal that reflects its confidence in cost control and operational efficiency.
TSMC's customers are looking for global manufacturing flexibility, which means U.S. customers may have to pay higher prices for wafers manufactured in the U.S. This price mechanism will be a key point in future negotiations and reflects the trend towards diversification of global supply chains. By building a factory in the United States, TSMC will not only be able to meet the geopolitical needs of customers, but also occupy a more favorable position in the global competition in the semiconductor industry.
CoWoS production capacity will be doubled again
The explosion of AI demand remains the core driver of TSMC's growth. In a recent public statement, TSMC executive Huang Renzhao revealed that TSMC's CoWoS (Chip on Wafer on Substrate) will double its capacity again, and it will more than double its expansion in 2024.
TSMC plans to build two back-end packaging factories in the United States, most likely in Arizona, near its Giga Fab fab. Huang Renzhao explained that with the increase in wafer production in the United States, it is a reasonable choice to deploy part of the CoWoS production capacity in the United States. In addition, TSMC has not yet determined the exact location of its U.S. R&D center, a decision that could be revealed in the coming months.
Potential collaboration with Intel In the first quarter of 2025 earnings call, TSMC explicitly ruled out the possibility of acquiring Intel's factories or assets. However, Huang said that TSMC has not completely closed the door to cooperation with Intel, emphasizing that any cooperation will be premised on maximizing shareholder interests. It is worth noting that the operation of the U.S. factory will consume a lot of TSMC's management and human resources, which means that future forms of cooperation may be more flexible, such as technology licensing, joint R&D, or supply chain collaboration.
From an investment perspective, TSMC's expansion plans and potential collaborations demonstrate its strategic intent to go global and lead in technology: the continued expansion of CoWoS production capacity will directly benefit from the strong demand for AI chips, providing TSMC with long-term growth momentum. Establishing a back-end packaging facility in the U.S. not only reduces geopolitical risks, but also better serves U.S. customers and improves supply chain efficiency.
|20% compound annual growth
Huang reiterated the company's forecast of a "compound annual growth rate (CAGR) of close to 20%" over the next five years, with cloud AI semiconductors, including AI accelerators and memory controllers, expected to grow by more than 40%. Although the growth of non-cloud AI business is relatively limited, the demand for semiconductors in devices such as smartphones and the Internet of Things (IoT) will increase significantly due to the edge computing trend, providing new growth points for TSMC.
TSMC received a $1.5 billion CHIPS Act subsidy in the fourth quarter of 2024, and whether it receives more subsidies in the future will depend on US government policy. While Huang did not comment on potential U.S. tariffs, he stressed that demand for domestic production from TSMC's major customers, such as Apple, Nvidia, AMD, Qualcomm and Broadcom, is expected to be strong enough to support the operations of its U.S. factories. This demand is not only due to geopolitical factors, but also reflects the urgent need for customers to diversify their supply chains.
Huang said that new process nodes, such as A16 and A14, will be prioritized at factories in Taiwan Province, China, in order to increase production capacity more efficiently. This strategy will shorten the time for the introduction of new technology nodes in overseas factories (such as the United States) and ensure TSMC's leading position in the global technology competition. By concentrating resources to increase the production capacity and technical level of local factories, TSMC is able to respond more quickly to market demand and maintain its technological advantage.
Overall, the rapid growth of cloud AI semiconductors will be the core engine of TSMC's growth in the next five years, and investors can focus on market opportunities in related areas. CHIPS Act subsidies and customer demand provide operational guarantees for TSMC's U.S. factories, but its long-term profitability still needs to be observed to see the progress of cost control and scale effects.
