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TSMC (TWSE: 2330, NYSE: TSM) today announced its intention to expand its investment in advanced semiconductor manufacturing in the United States by an additional $100 billion. Building on the company’s ongoing $65 billion investment in its advanced semiconductor manufacturing operations in Phoenix, Arizona, TSMC’s total investment in the U.S. is expected to reach US$165 billion. The expansion includes plans for three new fabrication plants, two advanced packaging facilities and a major R&D team center, solidifying this project as the largest single foreign direct investment in U.S. history.

This move underscores TSMC’s dedication to supporting its customers, including America’s leading AI and technology innovation companies such as Apple, NVIDIA, AMD, Broadcom, and Qualcomm.

Quarterly Earnings ​

Q1 2025 ​

TSMC Intends to Expand Its Investment in the United States to US$165 Billion to Power the Future of AI (2025/03/04)

In spite of the January 21 earthquake and several aftershocks, we work diligently to recover much of the lost production.

On financial ratios, accounts receivable turnover days increased 1 day to 28 days. Days of inventory increased 3 days to 83 days, primarily due to the ramping of new overseas fabs.

Compared to fourth quarter, our first quarter gross margin slightly decreased by 20 basis points sequentially to 58.8%. This was primarily due to 60 basis points impact from the January 21 earthquake and its aftershocks as well as the start of dilution from our Kumamoto fab, partially offset by cost improvement efforts.

We have just guided our second quarter gross margin to decrease by 80 basis points to 58% at the midpoint, primarily as the margin dilution impact from our Arizona fab starts to kick in. We expect the impact from overseas fab to grow more pronounced throughout the year, as we ramp up further in Kumamoto and Arizona and forecast 2% to 3% margin dilution impact for the full year 2025.

With our additional $100 billion investment plan in Arizona, we forecast the gross margin dilution from the ramp-up of our overseas fabs in the next five years to start from 2% to 3% every year in the early stages and widened to 3% to 4% in the latter stages.

Thus, even considering our global manufacturing expansion plans, we believe a long-term gross margin of 53% and higher is achievable.

We reiterate our 2025 capital budget is expected to be between USD38 billion and USD42 billion as we continue to invest to support customers' growth. About 70% of the capital budget will be allocated for advanced process technologies. About 10% to 20% will be spent for specialty technologies and about 10% to 20% will be spent for advanced packaging, testing, mask-making and others.

Our 2025 CapEx also includes a small amount related to our recently announced additional $100 billion investment plan to expand our capacity in Arizona.

Now, let me talk about the recent tariff. We understand there are uncertainties and risks from the potential impact of tariff policies. However, we have not seen any change in our customers' behavior so far. Therefore, we continue to expect our full year 2025 revenue to increase by close to mid-20s percent in US dollar terms.

We reaffirm our revenue from AI accelerators to double in 2025. The AI accelerators we define as AI GPU, AI ASIC, and HBM controllers for AI training and inference in the data center.

Based on our planning framework, we are confident that our revenue growth from AI accelerators will approach a mid-40s-percentage CAGR for the next five years period starting from 2024.

All our overseas decisions are based on our customers'need, as they value some geographic flexibility, and necessary level of government support. This is also to maximize the value for our shareholders.

We recently announced our intention to invest an additional USD100 billion in advanced semiconductor manufacturing in the United States. This expansion includes plans for three additional wafer manufacturing fabs, two advanced packaging fabs, and a major R&D center. Combined with our previously announced plan to build three advanced semiconductor manufacturing fabs in Arizona, this brings our total investment in the US to USD165 billion to support the strong multi-year demand from our customers.

Our first fab in Arizona has already successfully entered high-volume production in 4Q ‘24, utilizing N4 process technology, with a yield comparable to our fabs in Taiwan.

The construction of our second fab, which will utilize the 3-nanometer process technologies, is already complete, and we are working on speeding up the volume production schedule, based on the strong AI-related demand from our customers.

Our third and fourth fab will utilize N2 and A16 process technologies, and with the expectation of receiving all the necessary permits, is scheduled to begin construction later this year.

Our fifth and sixth fab will use even more advanced technologies. The construction and ramp schedule for this fab will be based on our customers' demand.

We also plan to build two new advanced packaging facilities and an R&D center in Arizona to complete the AI supply chain. Our expansion plan will enable TSMC to scale up to a GIGAFAB cluster, to support the needs of our leading-edge customers in smartphone, AI, and HPC applications.

With this additional USD100 billion investment plan to expand our leading-edge capacity in Arizona, I would also like to mention that TSMC is not engaged in any discussions with other companies regarding any joint venture, technology licensing, or technology transfer and sharing.

After completion, around 30% of our 2-nanometer and more advanced capacity will be located in Arizona, creating an independent leading semiconductor manufacturing cluster in the US. It will also create greater economies of scale and help foster a more complete semiconductor supply chain ecosystem in the US. Thus, TSMC continues to play a critical and integral role in enabling our customers' success, while remaining a key partner in enabling of the strength and leadership of the US semiconductor industry.

Next, in Japan, thanks to the strong support from the Japan central, prefecture, and local governments, our first specialty technology fab in Kumamoto has already started volume production in late 2024 with a very good yield.

The construction of our second specialty fab is scheduled to start later this year, subject to the readiness of the local infrastructure.

In Europe, we have received strong commitment from the European Commission and the German Federal, state, and city government. We are on track with our plan to build a specialty technology fab in Dresden, Germany.

In Taiwan, with support from the Taiwan government, we plan to build 11 wafer manufacturing fabs and four advanced packaging facilities over the next several years. Volume production of N2 is expected to start in second half 2025, and we are preparing for multiple phases of 2-nanometer fabs in both Hsinchu and Kaohsiung Science Parks to support the strong structural demand from our customers.

Yeah, Charlie, the widening of dilution on the gross margin in the later part of the five-year period is mainly from inflation in cost and also potential tariff-related cost increases. Those are the reasons.

As I said before, TSMC’s fab never stays stagnant. We always continue to improve it. And we need to establish a major R&D center in Arizona with about 1,000 engineers. That's a big amount. The focus will be support our manufacturing cluster, improve its technology, and allow it to operate independently.

Q4 2024 ​

As a reminder, six factors determine TSMC's profitability: leadership technology development and ramp-up, pricing, cost reduction, technology mix, capacity utilization and foreign exchange rate.

Underpinned by our technology leadership and broad customer base, we now forecast the revenue growth from AI accelerators to approach a mid-40% CAGR for the five-year period starting off the already higher base of 2024. We expect AI accelerators to be the strongest driver of our HPC platform growth and the largest contributor in terms of our overall incremental revenue growth in the next several years.

For the five-year period starting from 2024, we expect our long-term revenue growth to approach a 20% CAGR in US dollar term, fueled by all four of our growth platforms, which are smartphone, HPC, IoT and automotive.

Building on the successful result of our earlier engineering wafer production, we were able to pull ahead the production schedule of our first fab in Arizona. Our first fab has already entered the high-volume production in 4Q '24, utilizing N4 process technology with a yield comparable to our fabs in Taiwan. We expect a smooth ramp-up process. And with our strong manufacturing capability and execution, we are confident to deliver the same level of manufacturing quality and reliability from our fab in Arizona as from our fabs in Taiwan.
Our plans for the second fab and third fab in Arizona are also on track. These fabs will utilize even more advanced technologies such as our N3, N2 and A16, based on our customers' needs.

We believe N2, N2P, A16 and its derivative will further extend our technology leadership position and enable TSMC to capture the growth opportunity going into the future.

And secondly, the US fab cost, it is more expensive in the US, mainly because of several reasons. Number one, the smaller scale, right? Now number two, the higher price in the supply chain; and number three, the very early stage of the ecosystem. So if you add all these up, as we said, 2% to 3% dilution from our overseas fabs every year in the next 5 years.

Let me answer the second question first. Do we charge a little bit higher? Yes, we did, because we have a value of geographic flexibility, right? And you guys know Made in USA is a premium product. Yes, we discussed with our customers, and they all agreed and happy to work with TSMC so that we can -- because of the cost structure over there, so it's a little bit higher price over there.

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Glossary ​

DCE: Digital Consumer Electronics