As Taiwan Semiconductor Manufacturing Co.’s record quarter makes clear, demand from chipmakers shows no sign of slowing down. In fact, TSMC can’t manufacture quickly enough.
The artificial intelligence boom has created unending need for space on factory lines at the world’s leading chip manufacturer, and it could put a chokehold on the entire industry’s ability to scale. Last year, TSMC said it had the capacity to make more than 17 million 12-inch equivalent wafers. But customers want more.
“The competition is extremely fierce,” said Jordan Klein, an analyst at Mizuho Securities. “It’s a game of who can get the most leverage and supply.”
TSMC makes the vast majority of the world’s most advanced semiconductors, the graphics processors and central processors from Nvidia, AMD and Broadcom that are necessary for running AI workloads. Now a growing number of tech firms – Apple, Google, Amazon, Microsoft, Meta and OpenAI – also rely on TSMC to make custom in-house AI accelerators.
TSMC North American CEO Sajiv Dalal told CNBC he gets at least 10 calls a day about wafer capacity. TSMC posted record profit for a sixth straight quarter on Thursday and expects fourth-quarter revenue to be 58% higher than a year earlier, driven by strong demand for its advanced chipmaking technologies.
If compute demand continues to grow at the current rate over the next 12 to 18 months, Klein said capacity constraints at TSMC could threaten some of the industry’s massive infrastructure investments and the “aggressive revenue growth targets” from the AI companies. U.S. hyperscalers are projecting well over $700 billion in capital expenditures this year, and analysts expect that figure to jump in 2027.
AI ambitions are also threatened by a global shortage of memory chips. The logic chips that TSMC manufactures are more complex and expensive to produce. That means GPU and CPU leaders like Nvidia and AMD work out lengthy contracts and bespoke deals with TSMC behind closed doors years in advance. Nvidia CEO Jensen Huang and AMD CEO Lisa Su have both visited Taiwan multiple times this year.
Sid Sheth, CEO of AI chip startup D-Matrix, has fostered a relationship with TSMC for more than 20 years, and his company relies on TSMC to manufacture its processors. Sheth said that for TSMC customers, many roads lead to Kevin Zhang, a senior vice president of the Taiwanese company and a central figure in determining which chipmakers get access to its coveted factory lines.
He’s “currently probably the most popular person on the planet,” Sheth said in an interview. Sheth said that Jerry Qubain, D-Matrix’s vice president of manufacturing, has been visiting TSMC since 1992 and goes to Taiwan three to four times a year.
“This was even before Nvidia was founded,” Sheth said. “That’s a good example of a person we brought on board because of the relationships he has at TSMC.” Qubain joined D-Matrix in 2024. TSMC declined to participate in this story.
Betting on startups
TSMC had 534 customers in 2025. While it doesn’t name or rank them, its top 10 customers accounted for 78% of net revenue, with its top two bringing in 19% and 17%, respectively.
That leaves startups competing for capacity against customers with far bigger orders. Sheth said TSMC is “selective,” but has an incentive to back promising newcomers.
“They were very supportive of Nvidia and Broadcom when they were very young companies, and now these are their biggest customers today,” Sheth said. “They want to see a repeat of that.”
TSMC is hustling to bring much more capacity online, with new fabs in Taiwan, Japan and Arizona — it’s making advanced chips in the U.S. for the first time. In July, TSMC announced it was adding $100 billion and “several more” fabs to the six planned in Arizona, bringing its total commitment to $265 billion. TSMC is also reportedly considering an entirely new fab location in Texas.
All of this will take years to come online. In the meantime, analysts say TSMC is adding tools like ASML’s extreme ultraviolet lithography machines to existing factories to ramp up capacity. ASML smashed profit expectations in its earnings report Wednesday and said customers are interested in placing orders through 2030.
TSMC isn’t the only option. Capacity constraints create an opening for the other two leading advanced chip manufacturers, Samsung and Intel, to win customers.
“People want a second source to be able to twist TSMC’s arm and keep them honest on pricing,” Dan Hutcheson, an analyst at TechInsights, told CNBC.
That second source might be Intel, the only U.S.-based advanced logic manufacturer. Although its foundry business has been struggling with delays and setbacks for years, Hutcheson says all the big chipmakers are now testing there.
Trade association SEMI expects 102 new chip fabs will come online globally by 2029, including 15 in the U.S. and 78 in Asia. China is the primary growth engine, expected to nearly triple capacity by 2030. In a race to catch up, American fab investments are projected to more than double by 2029.
With an increasing Arizona presence and “extremely fierce” competition for wafer capacity, Klein says TSMC is “one of the best strategically positioned companies on the face of the planet.”
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