as Taiwan Semiconductor Manufacturing Co., Ltd.‘s record quarter reveals that demand from chipmakers shows no signs of slowing down. In fact, TSMC can’t manufacture fast enough.
The artificial intelligence boom is creating a never-ending need for space on the factory lines of the world’s biggest chipmakers, potentially crippling the industry’s ability to scale. TSMC announced last year that it has the capacity to manufacture more than 17 million 12-inch equivalent wafers. But customers want more than that.
“Competition is extremely fierce,” said Mizuho Securities analyst Jordan Klein. “It’s a game of who can get the most influence and supply.”
TSMC manufactures much of the world’s most advanced semiconductors needed to run AI workloads, including graphics and central processors from Nvidia, AMD, and Broadcom. Now Apple, Google, and a growing number of technology companies. AmazonMicrosoft, Meta, OpenAI – also relies on TSMC to create custom in-house AI accelerators.
TSMC North American CEO Sajiv Dalal told CNBC that the company receives at least 10 calls a day about wafer capacity. TSMC on Thursday reported record profits for the sixth consecutive quarter, and said it expects fourth-quarter sales to rise 58% from a year ago on strong demand for its advanced chip manufacturing technology.
Klein said TSMC’s capacity constraints could threaten some of the industry’s large infrastructure investments and the AI company’s “aggressive revenue growth goals” if computing demand continues to grow at its current pace over the next 12 to 18 months. U.S. hyperscalers are projecting capital spending of well over $700 billion this year, and analysts expect this number to soar in 2027.
AI ambitions are also threatened by a global memory chip shortage. The logic chips that TSMC makes are more complex and cost more to manufacture. That means GPU and CPU leaders like Nvidia and AMD have been signing long-term contracts and bespoke deals with TSMC behind closed doors for years. Nvidia CEO Jensen Huang and AMD CEO Lisa Su have visited Taiwan multiple times this year.
Sid Sheth, CEO of AI chip startup D-Matrix, has cultivated a relationship with TSMC for more than 20 years, and his company relies on TSMC to manufacture its processors. Sheth said many roads for TSMC’s customers lead to Kevin Chan, the Taiwanese company’s senior vice president and the central figure in determining which chipmakers get access to the company’s coveted factory lines.
He is “probably the most popular person on the planet right now,” Sheth said in an interview. Jerry Kuburn, D-Matrix’s vice president of manufacturing, has been visiting TSMC since 1992 and travels to Taiwan three to four times a year, Sheth said.
“This was before Nvidia was founded,” Sheth says. “This is a great example of someone we hired because of their relationships at TSMC.” Qubain joined D-Matrix in 2024. TSMC declined to participate in this article.
bet on startups
TSMC had 534 customers in 2025. Although not named or ranked, the top 10 customers accounted for 78% of net revenue, with the top two bringing in 19% and 17%, respectively.
That leaves startups competing for production capacity with customers who have much larger orders. Sheth said TSMC is being “selective” but has incentives to support promising new entrants.
“They were very supportive of Nvidia and Broadcom when they were very young companies, and now they’re their biggest customers,” Sheth says. “They want to see that repeat.”
TSMC is working hard to bring more production capacity online with new factories in Taiwan, Japan and Arizona, making advanced chips in the United States for the first time. TSMC announced in July that it would add $100 billion and “several” more fabs to its six planned fabs in Arizona, bringing the total cost to $265 billion. TSMC is also reportedly considering building an entirely new factory in Texas.
It will be years before all of this comes online. Meanwhile, analysts say TSMC is adding tools such as ASML’s extreme ultraviolet lithography equipment to existing factories to increase production capacity. ASML smashed profit expectations in its earnings report Wednesday and said customers were interested in orders through 2030.
TSMC is not your only option. Due to production capacity constraints, two other major advanced chip makers, Samsung and intelto acquire customers.
TechInsights analyst Dan Hutchison told CNBC: “People want a second source of information that will give TSMC a twist and keep pricing honest.”
That second source may be Intel, the only advanced logic manufacturer based in the United States. Hutchison said the company’s foundry business has been plagued by delays and setbacks for years, but all the major chipmakers now do testing there.
Industry group SEMI predicts that by 2029, 102 new chip factories will be operational worldwide, including 15 in the United States and 78 in Asia. China is the main growth driver, with production capacity expected to nearly triple by 2030. In the race to catch up, U.S. fab investment is expected to more than double by 2029.
With a growing presence in Arizona and “very intense” competition for wafer capacity, TSMC is “one of the best strategic companies on the planet,” Klein said.
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