Taiwan Semiconductor Manufacturing Company is expanding its global production capacity at an unprecedented pace, yet soaring demand for advanced chips has prompted Chief Executive Officer C.C. Wei to consider establishing a manufacturing presence in Texas alongside ongoing projects in Arizona and Taiwan.
Speaking during an earnings call, Wei disclosed that the company has dispatched teams to Texas to evaluate potential sites and has engaged in preliminary discussions regarding a partnership with Elon Musk’s proposed Terafab semiconductor operation. The potential American expansion coincides with a record financial quarter for the world’s largest contract chipmaker, fueled largely by surging demand for advanced manufacturing processes used in artificial intelligence applications.
TSMC reported a net income increase of 68.7 percent from the previous year, reaching NT$763.06 billion, or approximately $23.7 billion. Revenue climbed 41.2 percent in U.S. dollar terms to reach $46.72 billion. Major technology enterprises, including Apple and Nvidia, rely on the company for semiconductor production, and Wei noted that the firm’s largest American customers are pressing for additional manufacturing capacity.
The discussions surrounding a collaboration with Terafab, the semiconductor project developed by Musk alongside Tesla and SpaceX, involve structural questions regarding facility operations. Wei stated that any factory developed through such an arrangement would need to be operated by TSMC, though different ownership structures remain possible. Musk outlined a different operating model during a separate corporate call, indicating an intention for Terafab to operate its facilities independently while targeting an initial test chip in May or June 2027 and volume production in the second half of 2028. Musk acknowledged substantial uncertainty surrounding that timeline, and neither company has announced a formal agreement.
Financial parameters are shifting concurrently. Tesla subsequently reduced its 2026 capital spending forecast from over $25 billion to approximately $20 billion, though that adjustment does not alter Terafab’s timetable or TSMC’s ongoing discussions. TSMC maintained its own 2026 capital spending guidance between $60 billion and $64 billion, projecting that investment levels from 2026 through 2028 will exceed spending from the preceding three-year period.
Global expansion efforts encompass nearly 20 chipmaking and advanced packaging facilities currently in development worldwide, including 13 in Taiwan and five to six overseas locations. In Arizona, construction on TSMC’s second factory is complete, with high-volume production scheduled to begin in the third quarter of 2027. The company’s two-nanometer manufacturing process, which entered high-volume production late last year, accounted for 8 percent of third-quarter wafer revenue. Wei expects annual production capacity for the two-nanometer technology family to more than double in 2027.
Rapid expansion has introduced near-term financial pressures. TSMC’s gross margin declined by 1.3 percentage points from the prior quarter to 66.4 percent, primarily driven by the initial ramp-up costs associated with two-nanometer production. Chief Financial Officer Wendell Huang projected a fourth-quarter gross margin between 65 percent and 67 percent, reflecting another expected decline at the midpoint as overseas factories incur higher initial operating expenses.
Beyond capital expenditures, the chipmaker is addressing potential supply chain vulnerabilities. The company has begun exploring equipment alternatives utilizing fewer rare-earth components to minimize exposure to potential Chinese export restrictions. While these supplier discussions remain preliminary and no widespread replacement has been announced, the move reflects efforts to safeguard operations against geopolitical trade disruptions.
Market demand has enhanced TSMC’s pricing leverage, though Wei has remained guarded regarding specific pricing adjustments. When pressed by analysts on whether price increases would apply to existing commitments or future capacity, Wei explained that pricing strategies vary according to underlying technology, customer market segments, and production locations, noting that U.S. manufacturing carries distinct economic considerations compared to Taiwan. Specific price increases were not disclosed.
Looking ahead, TSMC projects full-year 2026 revenue to grow approximately 44 percent in U.S. dollar terms, with fourth-quarter revenue forecasted between $52.3 billion and $54.3 billion. While some consumer-facing and price-sensitive markets face ongoing pressure from rising component costs and broader economic uncertainty, the company continues advancing its multi-region footprint to satisfy specialized silicon demand.
