TSMC’s Strategic Pivot: Balancing Advanced Packaging and U.S. Expansion

TSMC US8740391003

Taiwan Semiconductor Manufacturing Company (TSMC) is advancing two critical strategic initiatives that will define its trajectory for the coming years. These moves address a central challenge in the semiconductor industry: producing high-performance and artificial intelligence (AI) chips at scale in locations increasingly demanded by both clients and geopolitical considerations. The dual focus is on breakthroughs in advanced packaging technology and a potential major expansion of its U.S. manufacturing footprint, facilitated by a new trade framework.

The company enters this strategic phase from a position of financial strength. For the fourth quarter of 2025, TSMC reported revenue exceeding $33 billion, representing growth of more than 20% year-over-year. This performance was primarily driven by demand in high-performance computing (HPC) and AI applications. Reflecting this robust performance, the board of directors approved a cash dividend of NT$6.0 per share for Q4 2025 on February 10.

Looking ahead, TSMC has outlined a capital expenditure (CapEx) budget for 2026 ranging between $52 billion and $56 billion. This substantial investment underscores its commitment to maintaining technological leadership and expanding capacity.

The Critical Role of Advanced Packaging

A key technological frontier for TSMC is advanced packaging, which is becoming as crucial as transistor miniaturization for boosting performance, density, and energy efficiency. The company recently announced progress in this area, with its Chip-on-Wafer-on-Substrate (CoWoS) technology remaining a central pillar.

To alleviate ongoing shortages of AI chips, TSMC is aggressively expanding its CoWoS packaging capacity. Previous reports indicate a target of 130,000 CoWoS wafers per month by the end of 2026—nearly a fourfold increase from capacity levels at the close of 2024. A significant part of this expansion will occur at the AP7 facility in Chiayi, Taiwan, which is scheduled for a phased build-out through 2027. Upon completion, it is poised to become the world's largest advanced packaging site.

U.S. Expansion Gains New Impetus

Parallel to its technological push, TSMC's manufacturing geography is evolving. A prospective new trade agreement between Taiwan and the United States is expected to lower tariffs and streamline investments in U.S.-based semiconductor, energy, and AI projects. According to the Financial Times, the proposed rules include a practical incentive for companies constructing new U.S. facilities: during the construction phase, chips can be imported duty-free up to 2.5 times the planned capacity of the future plant.

This development adds context to reports from Monday suggesting TSMC is evaluating an additional U.S. investment package worth $100 billion. If realized, this would bring its total committed U.S. investment to approximately $265 billion. The company has already committed $165 billion for its Fab 21 complex in Arizona, which is planned to include six fabrication modules, two advanced packaging plants, and an R&D center.

Recent land acquisitions support the feasibility of further expansion. TSMC purchased an additional 900 acres adjacent to its existing 1,100-acre site in Arizona. Reports speculate this land could accommodate up to five additional fabrication plants, with a potential official announcement expected in April.

Production Mix and Geographic Focus

Despite ambitious international plans, TSMC maintains that Taiwan will remain its manufacturing core. Company projections indicate that up to 30% of its chips produced on the 2-nanometer node and more advanced technologies could eventually be manufactured in the United States. Taiwanese government officials have dismissed suggestions that 40% to 50% of the nation's chip production could be relocated abroad.

The technological breakdown of TSMC's revenue highlights its leading-edge focus. In Q4 2025, "Advanced Technologies" (defined as 7nm and smaller) accounted for approximately 77% of total wafer revenue. For the full year 2025, the figure was 74%, up from 69% in 2024. High-performance computing represented 55% of Q4 revenue and 58% of the full-year 2025 total.

The company's near-term execution hinges on two factors: successfully ramping up its CoWoS packaging capacity as planned by late 2026, and the potential April announcement detailing additional U.S. fabs and the possible $100 billion investment package.

@ boerse-global.de | US8740391003 TSMC’S