TSMC Gains Momentum from Manufacturing Milestone and Regulatory Relief

TSMC US8740391003

Taiwan Semiconductor Manufacturing Company (TSMC) is entering 2026 bolstered by two significant developments that reinforce its technological edge and provide operational certainty. The dual announcements address both future growth prospects and immediate geopolitical concerns, offering a compelling narrative for investors.

In a move that mitigates a key risk, TSMC has secured a new one-year export license from the U.S. Department of Commerce, effective January 1, 2026. This authorization permits the continued shipment of U.S. manufacturing equipment to TSMC’s fabrication plant in Nanjing, China.

The license replaces the previous "Validated End-User" status, which was set to expire on December 31, 2025. Operationally, this means TSMC can maintain production of chips on more mature process nodes, primarily 16nm, at the Nanjing facility without seeking individual approvals for each equipment shipment. This places the company on similar regulatory footing as its South Korean rivals, Samsung Electronics and SK Hynix.

While the Nanjing fab does not produce leading-edge chips for artificial intelligence, it contributes approximately 2.4% to TSMC’s total revenue. Its output remains crucial for supply chains in sectors like automotive and consumer electronics. The license extension stabilizes this revenue stream amidst a broader backdrop of tightening U.S. technology export controls to China.

Next-Generation Chip Production Ramps Up

Simultaneously, TSMC has officially commenced volume production of its advanced 2-nanometer (N2) semiconductor technology. This manufacturing ramp-up is taking place at two Taiwanese sites: the Wafer Fab 20 in Hsinchu and the Wafer Fab 22 in Kaohsiung.

The new process node is built around nanosheet transistor architecture, which delivers substantially higher transistor density and superior power efficiency. These attributes are critical for power-hungry applications such as artificial intelligence and high-performance computing.

Major clients, including Nvidia and Apple, are reported to have already secured capacity in the initial production waves. This strong early demand signals robust market interest in the 2nm node and allows TSMC to maintain its competitive distance from rivals like Samsung and Intel.

Key aspects of the 2nm launch:

• Volume manufacturing of the 2nm N2 technology is now underway.
• Production is localized at two facilities in Taiwan (Hsinchu and Kaohsiung).
• Nanosheet transistors enable greater performance with reduced power consumption.
• Leading customers, including Nvidia and Apple, have made early capacity reservations.

According to current planning, the 2nm technology is poised to become the new standard for high-performance computing and premium smartphones throughout 2026 and 2027. A successful ramp-up with stable yield rates would significantly strengthen TSMC's margin and earnings profile in this vital growth segment.

Market Performance and Strategic Position

The combination of technological execution and reduced regulatory uncertainty has been received positively by the market. TSMC shares closed 2025 at a record high of $303.89, marking an impressive twelve-month gain of approximately 55%. The current price level sits comfortably above key moving averages, underscoring a sustained upward trend.

Strategically, the ramp of 2nm production cements TSMC’s position at the forefront of the semiconductor industry. Its consistent ability to execute complex technology roadmaps, even amid intense competition, reinforces its role as the indispensable manufacturing partner for major chip designers. The renewed U.S. license, meanwhile, ensures its China business can continue on a stable footing without being subjected to the most severe export restrictions.

Upcoming Focus: Fourth Quarter 2025 Earnings

Attention now turns to the fourth-quarter 2025 financial results, anticipated in mid-January. The report and subsequent management commentary will be scrutinized for:

• Initial insights into the yield rates and cost structure of the new 2nm production line.
• Demand trends for existing 3nm and 5nm AI accelerators.
• Updated plans for capacity expansion in Arizona and Japan.

TSMC moves into the new year with clear operational momentum. The forthcoming guidance will reveal the extent to which the 2nm launch and stabilized Nanjing operations are reflected in formal revenue and investment forecasts.