TSMC announces $31.4B expansion for sub-1.4nm chips

Taiwan Semiconductor Manufacturing Company ↗ 6.33% announced on Thursday plans to build three new wafer fabrication plants in Longtan, northern Taiwan, targeting sub-1.4-nanometer chip production in an investment expected to exceed NT$1 trillion, or roughly $31.4 billion. The first facility is projected for completion around 2030, with mass production to follow shortly after.gurufocus+1

Record Earnings Fuel Aggressive Spending

The Longtan expansion follows a stretch of historic financial performance. In Q2 2026, TSMC posted consolidated net revenue of NT$1,270.38 billion (approximately $40.2 billion), a 36% increase year-over-year and its fifth consecutive quarterly revenue record. Net income surged 77.4% to NT$706.56 billion, driven by what CFO Wendell Huang called "strong demand for our leading-edge process technologies."news.alphastreet

High-performance computing, encompassing AI data center accelerators, now accounts for roughly two-thirds of TSMC's revenue, displacing smartphones as the company's primary growth engine. CEO C.C. Wei said during the earnings call that "agentic AI and CPUs are driving additional silicon demand" beyond initial forecasts.news.alphastreet

Management raised full-year 2026 capital expenditure guidance to $60–64 billion, up at least $4 billion from prior estimates, and set Q3 revenue guidance at $44.6 billion to $45.8 billion. The company also announced an additional $100 billion investment in Arizona, raising its total planned U.S. commitment to $265 billion.cnbc+1

Packaging Bottleneck Drives CoWoS Doubling

Alongside its logic fab expansion, TSMC is moving to address a persistent bottleneck in advanced packaging. Analysts cited by Taiwan's Economic Daily News estimate that TSMC plans to double its CoWoS capacity from approximately 130,000 wafers per month at the end of 2026 to 260,000 wafers per month by end of 2028. The expansion will focus on TSMC's Arizona campus and the AP7 facility in Taiwan.communicationstoday+2

CoWoS is the dominant packaging technology for AI GPUs made by Nvidia ↗ 2.78% and is used by other major customers including Apple ↘ 0.52% and AMD Advanced Micro Devices, Inc. ↗ 11.04%. The shortage has pushed some demand to rivals including Intel ↗ 7.71%, whose EMIB-T packaging could reach 40,000 to 45,000 wafer equivalents per month by 2028.wccftech+1

What Comes Next

TSMC's 2-nanometer node entered volume production during Q2 2026, and management has guided for a "steep ramp-up" in Q3. Yield trajectory at that node will determine whether gross margins — which hit 67.7% in Q2 — hold near record levels or compress as new capacity comes online. For investors and the broader AI supply chain, the question is whether hyperscaler capital expenditure commitments sustain through 2027 or moderate as model training becomes more efficient.news.alphastreet