TSMC's record capital expenditure of $52-56 billion in 2026 is primarily aimed at expanding capacity to meet surging AI chip demand. Despite this significant investment, advanced-node supply is expected to lag demand for years.
TSMC's Pricing Power
TSMC is well-positioned to maintain and even increase its pricing power despite rising investment intensity.
Dominant Market Position: TSMC is the world's largest contract chipmaker and dominates advanced chip fabrication, holding a 72% share in the global foundry market and over 90% market share for advanced AI chips.
High Demand for Advanced Nodes: Demand for TSMC's 3nm process technology continuously exceeds supply, leading to sold-out fabrication lines and customers paying premiums for expedited manufacturing. TSMC has temporarily halted new 3nm projects and is directing customers to its 2nm node due to capacity constraints.
Historical and Future Price Hikes: TSMC has increased prices by over 15% on average since 2019 and plans further price hikes for its advanced nodes through 2029.
AI-Driven Growth: The company's AI-related chip foundry business's revenue compound annual growth rate forecast has been significantly raised to the "mid-to-high 50s".
Acceptable Concessions: While depreciation expense is expected to rise and overseas operations may dilute gross margins by 2% to 4%, these are considered acceptable given the robust demand projections.
Competitors' Potential to Gain Market Share Amid Shortages
Persistent advanced-node shortages create opportunities for rivals, though the extent of their gains varies.
Intel (INTC):
Foundry Push: Intel is making a significant push into the foundry business with its Intel 18A process node (2nm), which it claims is the "most advanced semiconductor process ever developed and manufactured in the United States".
Capacity and Diversification: Intel aims to provide available capacity and geographic diversification as customers seek alternatives to TSMC due to geopolitical concerns and supply chain overheating. Intel's server CPU capacity is nearly sold out for 2026, and it's considering price increases.
Strategic Collaborations: Nvidia has invested in Intel, with Intel manufacturing custom CPUs for Nvidia. Apple is also reportedly considering Intel's 18A process for some chips.
Yield Improvements: Despite past struggles, Intel claims its yields are now improving at an industry-standard rate.
Samsung Electronics:
Lower Market Share: Samsung holds approximately 7% market share in the chip foundry industry, significantly trailing TSMC's 72%.
Yield Challenges: Samsung has reportedly struggled with yields for its latest processes, leading some customers, like AMD, to shift orders to TSMC.
Focus on HBM: Samsung is increasingly focusing on high-bandwidth memory (HBM) solutions, where TSMC does not directly compete. Samsung's HBM4 chips have received positive feedback from customers, and it is in discussions with Nvidia to supply these chips.
New Deals and Challenges: Samsung expects momentum in its foundry business with new supply deals, including a $16.5 billion agreement with Tesla. However, it faces warnings of rising component costs and global tariff risks in 2026.
In conclusion, while TSMC is expected to maintain its strong pricing power due to unparalleled demand and technological leadership, persistent advanced-node shortages will likely allow Intel to gain market share as a viable alternative for chip fabrication. Samsung's gains may be more concentrated in specialized areas like HBM rather than broad advanced-node foundry services.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
