Chipmaking Titan C.C. Wei Eyes Texas as TSMC’s A.I. Demand Surges
Observer ·
TSMC's profits climbed nearly 69 percent as C.C. Wei considered expanding beyond Arizona. Talks involving Musk's Terafab remain preliminary.
Taiwan Semiconductor Manufacturing Company (TSMC) is expanding its production capacity at an “unprecedented pace,” but demand for advanced chips is so strong that CEO C.C. Wei is considering adding another U.S. manufacturing location beyond Arizona.
During TSMC’s Oct. 15 earnings call , Wei disclosed that the company has sent teams to Texas to evaluate potential sites. It has also held preliminary discussions about working with Elon Musk ’s proposed Terafab semiconductor operation.
The potential expansion follows another record quarter for the world’s largest contract chipmaker. TSMC’s net income rose 68.7 percent from a year earlier to NT$763.06 billion, or approximately $23.7 billion, while revenue reached $46.72 billion, up 41.2 percent in U.S. dollar terms.
Much of that growth comes from demand for the advanced manufacturing processes used in A.I. applications. TSMC supplies chips to major technology companies including Apple and Nvidia , and Wei said its largest American customers are pressing for more production capacity.
Wei said TSMC is discussing whether it could use manufacturing capacity associated with Terafab, the semiconductor project Musk is developing with Tesla and SpaceX .
But there is an unanswered question about who would operate any participating facility.
During TSMC’s earnings call, Wei said a factory developed through such an arrangement would have to be operated by TSMC, although different ownership structures could be possible.
Musk has since described a different operating model.
During an Oct. 20 SpaceX call, Musk outlined plans for Terafab to begin volume chip production in 2028 . He also reiterated the intention for Terafab to operate its facilities independently.
The project is targeting an initial test chip in May or June 2027, followed by volume production in the second half of 2028. Musk acknowledged considerable uncertainty around that schedule.
The two approaches do not necessarily rule out cooperation, but neither company has announced an agreement.
The financial picture is also changing. Following its latest earnings report, Tesla reduced its 2026 capital spending forecast from more than $25 billion to approximately $20 billion.
The reduction does not establish a change in Terafab’s timetable or TSMC’s discussions with the project. The size of any future investment by TSMC remains undisclosed.
Wei has nearly 20 chipmaking and advanced packaging facilities in development worldwide, including 13 in Taiwan and another five to six overseas.
In Arizona, TSMC has completed construction of its second factory, with high-volume production scheduled to begin in the third quarter of 2027.
The company’s two-nanometer manufacturing process, which entered high-volume production late last year, accounted for 8 percent of third-quarter wafer revenue. Wei expects annual capacity for the family of two-nanometer technologies to more than double in 2027.
TSMC maintained its 2026 capital spending forecast of $60 billion to $64 billion. Investment from 2026 through 2028 is expected to be substantially higher than in the preceding three years.
But the expansion is already affecting profitability.
TSMC’s gross margin declined 1.3 percentage points from the previous quarter to 66.4 percent, primarily because of the initial ramp-up of two-nanometer production.
Chief Financial Officer Wendell Huang projected fourth-quarter gross margin between 65 percent and 67 percent, implying another 0.4-percentage-point decline at the midpoint.
The company also expects higher costs at overseas factories as additional production lines begin operating.
Manufacturing costs are not the only concern.
According to an Oct. 22 Reuters report , TSMC has begun exploring equipment that uses fewer rare-earth components to reduce its exposure to possible disruptions caused by Chinese export restrictions.
The discussions with equipment suppliers remain preliminary, according to Reuters, which cited three people familiar with the matter. TSMC declined to comment, and no widespread replacement of existing equipment has been announced.
Strong demand has strengthened TSMC’s position with major customers, but Wei has been reluctant to disclose how that affects the prices they pay.
During the earnings call, an analyst asked whether reported price increases would apply to existing customer commitments or primarily to additional manufacturing capacity.
Wei did not directly answer.
Instead, he explained that the company’s pricing strategy varies according to the technology involved, the customer’s market segment and the location of production.
Manufacturing in the United States, for example, carries different economics from production in Taiwan.
Wei did not disclose specific price increases or clarify whether existing contracts would be repriced.
Despite the higher manufacturing costs, TSMC expects full-year 2026 revenue to grow approximately 44 percent in U.S. dollar terms. Fourth-quarter revenue is projected at $52.3 billion to $54.3 billion.
Wei acknowledged that some consumer and price-sensitive markets remain under pressure from rising component costs and broader economic uncertainty.
For now, the company is preparing additional capacity in Taiwan, Arizona and elsewhere while examining whether Texas offers another opportunity.
TSMC’s expansion gives Wei more ways to serve customers who need advanced chips. It also requires more capital as overseas operating expenses and supply-chain vulnerabilities put additional pressure on the company.