The massive AI cycle has prompted semiconductor giants such as TSMC to invest billions into infrastructure, but even that won't be enough to keep up with demand.
TSMC Says It Won't Be Able To Keep Up With AI Demand Despite Billions Being Spent To Bring Up New Production Facilities
Earlier this week, TSMC announced in its earnings call that the company's capital expenditures are expected to reach $56 billion in 2026. That's lots of money, and all of this is being poured into the construction of new chipmaking facilities, while upgrading existing lines to sustain more production.
Despite all of this money being spent, TSMC says that it won't be able to keep up with the gigantic AI demand that has currently gripped every sector of the tech industry. From main components such as GPUs, CPUs, and Memory, to other vital electrical equipment such as voltage regulators, ICs, cabling, and materials required to build these solutions, all of it is currently in short supply.
As big players such as NVIDIA, AMD, Apple, and the rest continue to renew their wafer orders, TSMC is very much anticipating shortages through 2027, not just 2026. TSMC is currently planning to invest in a range of facilities across the globe. The regions include Japan, Taiwan, United States, where 3nm chip manufacturing plants are set to be constructed. The Taiwan plant is expected to become operational by the first half of 2027, while the US plant will be ready by the second half of 2027. Meanwhile, the one plant in Japan is set to begin manufacturing by 2028.
In addition to all the new fabs, we continue to convert 5-nanometer tools to support 3-nanometer capacity in Taiwan. We are also leveraging our manufacturing excellence to drive greater productivity across our fab in all locations to generate more wafer output.
We are also focusing on capacity optimization across nodes, which includes flexible capacity support among the N7, N5 and N3 nodes. Thus, we are using multiple levers to do everything we can, wherever we can, however we can to maximize the support to all our customers across all platforms. Also, let me emphasize that while the capacity is tight, we do not pick-and-choose or play favorites among our customers.
C.C. Wei - TSMC President & CEO
TSMC CEO, C.C. Wei, said that while they haven't added additional capacity to their existing plants, once a node reaches its peak production capacity, that is about to change, as existing plants will be upgraded to supplement the growing capacity needs.
Since TSMC is being hammered due to supply constraints, vendors have started to diversify their chip-making plans.
Based on our assessment, to meet the strong demand in AI applications, we are stepping up our CapEx investment to increase our N3 capacity. Thus, we are now executing a global capacity plan to support the robust multiyear pipeline of demand for 3-nanometer technologies, which are used by smartphone, HPC/AI, including HBM base dies, automotive and IoT customers.
In Taiwan, we are adding a new 3-nanometer fab to our GIGAFAB cluster in Tainan Science Park. Volume production is scheduled for the first half of 2027. In Arizona, our second fab will also utilize 3-nanometer technologies. Construction is already complete and volume production will begin in the second half of 2027. In Japan, we now plan to utilize 3-nanometer technology in our second fab and volume production is scheduled in 2028.
C.C. Wei - TSMC President & CEO
Tesla is working with both TSMC and Samsung for its next-gen AI chips while also gearing up its own Terafab partnership with Intel. Intel is also rumored to win some major customers by the end of this year with its 14A process technology. Samsung has also seen a big uptick in customers lining up to use its foundries, but its core focus currently remains at DRAM production, such as HBM and LPDDR, which are seeing huge interest due to the rise of Agentic AI.
It will be interesting to see how TSMC traverses through the AI super cycle, as every major tech company is currently bombarded with its own supply issues. TSMC, being the biggest semiconductor maker in the world, has a lot riding on its shoulders, and the extra money they are investing in new facilities should offer some relief.
News Source: EETimes
About the author: A Software Engineer by training and a PC enthusiast by passion, Hassan Mujtaba serves as Wccftech's Senior Editor for hardware section. With years of experience in the industry, he specializes in deep-dive technical analysis of next-generation CPU and GPU architectures, motherboards, and cooling solutions. His work involves not only breaking news on upcoming technologies but also extensive hands-on reviews and benchmarking.
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