By Adam Clark
Taiwan Semiconductor Manufacturing is ready to make massive investments in chip-manufacturing capacity. Now the question is how much of that is due to its confidence in a long-term artificial-intelligence boom versus its need to build American factories under a U.S.-Taiwan trade deal.
TSMC will spend up to $56 billion on capital expenditures this year, up around 30% from 2025, and executives said the Taiwanese chip manufacturer expects elevated capex for the next three years.
That raises the question about what TSMC has heard from customers such as Nvidia, Advanced Micro Devices and Qualcomm about their plans to make AI chips which is giving it such confidence.
"We believe that TSMC has been quite prudent in its capacity planning, with sufficient checks built in for the typically over-enthusiastic forecasting from customers at this stage of the upcycle," wrote J.P. Morgan analyst Gokul Hariharan in a research note.
One explanation for at least some of the blowout capex forecast could be the terms of the U.S.-Taiwan trade agreement, announced Wednesday. Taiwan has committed to investing at least $250 billion in semiconductor and technology manufacturing in the U.S. in exchange for a lower tariff on Taiwanese goods
TSMC will likely bear some of the spending burden, with the company set to add several new factories to its cluster in Arizona. TSMC had already pledged a total of $165 billion in U.S. investment, including building three new chip plants.
While margins for American-made chips are likely to be lower than those manufactured in Taiwan due to labor costs, TSMC likely considers the price reasonable if it reduces the threat of semiconductor tariffs. It might also mitigate investor concerns about China's ambition to claim Taiwan. In any case, TSMC raised its long-term structural gross margin target to 56% or more, from 53%-plus previously, suggesting it is confident it can pass on any costs from its U.S. expansion to its customers.
Another reason for the higher capex might be to fend off any threat from Intel or Samsung Electronics. TSMC currently enjoys a market share of more than 95% in AI chip manufacturing but Nvidia and the U.S. government have both recently invested in Intel, raising the prospect of the American company emerging as a more credible competitor.
"Beyond the cycle, we believe it is important for TSMC to step up capex, since a conservative approach could have given enough leeway for competitors such as Samsung Foundry and Intel to start winning some leading edge projects and get a chance to prove themselves," Hariharan wrote.
American depositary receipts of TSMC were up 1.1% in premarket trading Friday after rising 4.4% on Thursday, while the VanEck Semiconductor exchange-traded fund was up 1.4%, and the S&P 500 had risen 0.2%.
Write to Adam Clark at adam.clark@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
January 16, 2026 09:03 ET (14:03 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments