TSMC to Invest $56B in Fabs This Year, and It’s Still Not Enough

Taiwan Semiconductor Manufacturing Company (TSMC) said it plans to spend between $52 and $56 billion in capital expenditures this year, but it expects the parts shortage to remain through 2027.

The comments were made by Jen-Chau Huang, senior VP & CFO, on a conference call with financial analysts to discuss TSMC’s first quarter earnings. It was a great quarter, too, with a 58% jump in net profit and 41% revenue growth. The company raised its 2026 revenue outlook to over 30% growth.

There has been considerable shifting in TSMC’s customer base. Back in 4Q 2019, HPC was only 29% of TSMC’s revenue, while smartphones accounted for 53% of revenue. Today, things have flipped, with HPC now accounting for 61% of TSMC’s revenue and smartphones accounting for only 26%.

In TSMC’s case, CapEx is an indicator of locked-in customer prepayments and supply agreements. In other words, TSMC’s customers are prepaying for capacity to build products that they will need in the future. By raising its CapEx guidance, TSMC is signaling that customers like Nvidia and AMD are already competing for capacity in 2027-28.

TSMC is making a massive investment in the United States. Its Arizona fab will run $165 billion total and take up more than 1,100 acres. TSMC Arizona will bring the company’s most advanced process nodes to the US, but putting an advanced manufacturing facility that requires vast amounts of water in the desert seems dubious.

And despite all of this spending, TSMC says that it can’t keep up with the enormous demand AI is placing on the whole sector. For some time, there have been considerable shortages of everything from main components such as GPUs, CPUs, and memory, to the electrical equipment used to build the facilities, such as voltage regulators, ICs, cabling, and even concrete.

TSMC Chairman and CEO C.C. Wei told the call it takes two to three years to build a fab, “no shortcuts,” and another year or two to ramp it up. So even though construction is moving forward at the Arizona plant, it’s still a long process of construction.

A new Taiwan plant is expected to be operational by the first half of 2027, while the TSMC Arizona plant will be ready by the second half of 2027. Also, a new plant in Japan is set to begin manufacturing by 2028.