TSMC delivered a record quarterly financial report, which is sufficient to show that the demand from chip manufacturers has not slowed down at all, and TSMC's production speed can no longer keep up with market demand.
The craze has led to a shortage of production capacity at the workstations of this world-leading chip foundry, which may even limit the expansion capabilities of the entire industry. TSMC announced its 12-inch equivalent wafer production capacity last year, but customers desire to obtain even more capacity.
Sumitomo Securities analyst Jordan Klein stated, 'The competition has become exceptionally fierce. It's essentially a game to see who can gain more say and obtain larger supply quotas.'
The vast majority of the world's most advanced semiconductors, which are essential for running AI and include NVIDIA, AMD, Broadcom's GPU, and CPU, are all manufactured by TSMC. Nowadays, an increasing number of technology companies—Apple, Google, Amazon, Microsoft, Meta, and OpenAI—also rely on TSMC to produce their own custom AI acceleration chips.
TSMC's North America CEO, Sajiv Darar, revealed that he receives at least 10 calls a day asking about wafer production capacity. On Thursday, TSMC reported impressive results for the sixth consecutive quarter; driven by strong demand for advanced process chips, the company expects its revenue in the fourth quarter to increase by 58% year-on-year.
Klein stated that if the demand for computing power continues to rise at the current rate over the next 12-18 months, TSMC's capacity constraints could impact the industry's substantial infrastructure investment plans, as well as the "aggressive revenue growth targets" set by AI companies. American hyperscalers have already spent over $700 billion in capital expenditures this year, and analysts expect this figure to continue to rise in 2027.
AI While developing, they also face the constraint of a global shortage of storage chips. TSMC's logic chips have a higher level of complexity in manufacturing and thus higher production costs. As a result, leaders in the industry such as NVIDIA, AMD, GPU, and CPU negotiate in private with TSMC several years in advance to sign long-term contracts and customize exclusive cooperation plans. NVIDIA CEO Jensen Huang and AMD's Chief Executive Officer Hsu Tzu-feng have visited Taiwan, China, on multiple occasions this year.
The CEO of AI, a chip startup company, D-Matrix, Sid Xie Si, has a collaboration history with TSMC that spans over 20 years. The company relies on TSMC to produce its processors. Xie Si stated that for TSMC's customers, many business matters ultimately come to the hands of Zhang Kai, TSMC's Senior Vice President; he is the key figure who decides which chip manufacturers can access the valuable production line resources.
In an interview, Xie Si said, 'He is probably the most popular person in the world right now.' Jerry Cuban, the vice president of manufacturing at D-Matrix, has been working with TSMC since 1992 and travels to China and Taiwan three or four times a year.
Xie Si said, "At that time, NVIDIA hadn't even been established yet. It was his connections at TSMC that convinced us to hire him for our company." Kuban joined D-Matrix in 2024.
Betting on startups
In 2025, TSMC's top ten customers contributed a significant portion of the company's revenue, with the first and second largest customers contributing 19% and 17% of the income respectively.
This means that startups have to compete with giant customers who have much larger order volumes for production capacity. Xie Si said that TSMC's customer selection is very cautious, but they also have the motivation to support emerging companies with great potential.
When NVIDIA and Broadcom were still small companies, TSMC gave them strong support. Today, these two companies have become TSMC's largest customers. TSMC hopes that history will repeat itself.
TSMC is stepping up efforts to expand its production capacity, building new factories in China, Taiwan, Japan, and Arizona, and is also starting to produce advanced-process chips for the first time on U.S. soil. In July this year, TSMC announced that it would add "several more" wafer fabrication plants to the planned six in Arizona, with a total investment commitment of $265 billion for the project. There are also reports that TSMC is evaluating the possibility of building a complete wafer factory in Texas.
But all of this new production capacity will take several years to be put into operation. Analysts say that during this transition period, TSMC is still purchasing ASML's extreme ultraviolet (EUV) lithography machines to install in its existing factories in order to increase production capacity. ASML stated in its financial report on Wednesday that customer orders have already extended until 2030.
TSMC is not the only option. The tight production capacity has also created an opportunity for two other leading advanced chip manufacturers, Samsung and Intel, to compete for customers.
TechInsights Analyst Dan Hutchison stated: 'Companies all wish to have a second source of supply in order to counter TSMC and constrain its pricing.'
Intel is the only advanced logic chip foundry in the United States. Despite the many challenges and setbacks its foundry business has faced over the years, Hachson stated that today all major chip giants are conducting tape-out tests at Intel.
The Semiconductor Industry Association SEMI predicts that by 2029, there will be an additional 102 new chip wafer factories in operation globally, with 15 in the United States and 78 in Asia. China is the main driving force for growth, and it is expected that by 2030, China's domestic chip production capacity will nearly triple. To catch up, the investment scale of wafer factories in the United States is expected to more than double by 2029.
Klein's evaluation: With the continuous establishment of factories in Arizona and the fierce competition for wafer production capacity, TSMC "is one of the companies with the most advantageous global strategic layout."
