TSMC Commits $100 Billion to Capacity Expansion

Taiwan Semiconductor Manufacturing Company (TSMC) is accelerating its advanced process expansion with a massive investment plan exceeding $100 billion. Its Central Taiwan Science Park (CTSP) facilities are undergoing a large-scale upgrade, triggering a ripple effect across the semiconductor supply chain.

According to industry sources, TSMC has initiated a major upgrade program at its Fab 15A in CTSP. The existing 28nm–22nm process lines will be gradually phased out and replaced with advanced 4nm production. This transition involves relocating legacy equipment and installing new-generation tools, significantly boosting advanced manufacturing capacity.

Advanced Node Expansion and AI Demand Driving Growth

Alongside process upgrades, construction of TSMC’s 1.4nm fab in the CTSP Phase II park is progressing rapidly. The expansion is largely driven by surging demand for AI chips, particularly from NVIDIA. This has also stimulated growth in advanced packaging providers such as ASE Technology, which are actively expanding their production footprint in central Taiwan.

Currently, TSMC’s CTSP layout includes Fab 15A and 15B. Fab 15A focuses on mature nodes (28nm–22nm), while Fab 15B primarily produces 7nm chips. The new 1.4nm fab represents the next leap in cutting-edge semiconductor technology.

Supply chain insiders indicate that the upgrade of Fab 15A alone will require investments exceeding NT$100 billion, covering cleanroom upgrades and advanced equipment installations. The displaced mature-node equipment is expected to be relocated to TSMC’s upcoming fab in Dresden, Germany.

European Expansion and Strategic Partnerships

TSMC’s Dresden fab, scheduled for mass production in 2027, is a joint venture with Bosch, Infineon, and NXP. With total investment exceeding €10 billion, the facility will focus on 28/22nm and 16/12nm nodes, targeting automotive and industrial applications.

Advanced Packaging Boom Fuels Further Expansion

Among downstream players, ASE Technology Holding is expanding most aggressively. Recently, SPIL (a subsidiary of ASE) acquired manufacturing facilities in Southern Taiwan Science Park (STSP) from ChipMOS and Powerchip for NT$10.8 billion.

Earlier this year, SPIL also purchased Innolux’s Fab 5 and related facilities for NT$14.85 billion. Within just over a month, the company invested nearly NT$32 billion in factory acquisitions, reflecting strong demand for advanced packaging services.

SPIL has also applied for additional expansion in Erlin Park and Houli Park, where new fab construction is already underway. Local authorities have begun preliminary land allocation processes to support these developments.

Capacity Constraints Raise Industry Concerns

Amid tight capacity, reports suggest that Apple is exploring alternative chip suppliers, including Intel and Samsung. This has raised concerns that TSMC’s advanced node capacity may be reaching its limits, leading to potential order spillover.

According to Bloomberg, Apple has entered early-stage discussions with Intel regarding foundry services and has also visited Samsung’s Texas fab, which is expected to produce advanced chips.

However, sources emphasize that these discussions remain preliminary. Apple still has reservations about non-TSMC technologies, and no concrete orders have been placed.

AI Boom Reshaping Customer Dynamics

Apple has long been one of TSMC’s largest customers and a pioneer in adopting its latest process technologies. However, NVIDIA has recently overtaken Apple as TSMC’s top client, driven by explosive demand for AI chips.

Estimates suggest Apple contributed approximately 17% of TSMC’s revenue last year, second only to NVIDIA’s 19%.

Over the past decade, Apple’s “Apple Silicon” strategy has shifted chip design in-house, relying heavily on TSMC’s advanced nodes. The latest iPhones and Macs are powered by chips manufactured using TSMC’s 3nm process.

AI Demand Causing Chip Shortages

The rapid expansion of AI data centers has strained global semiconductor capacity, crowding out supply for non-AI applications. Apple’s integration of AI features into its devices has further increased demand, particularly for AI-capable Macs, which are selling beyond expectations.

Apple executives have acknowledged supply constraints impacting both iPhone and Mac growth. Meanwhile, Intel and Samsung have yet to match TSMC’s scale and production stability in advanced nodes.