When you're the world's most important chipmaker and AI demand is going absolutely bonkers, sometimes you need to hit pause and reassess. That's exactly what Taiwan Semiconductor Manufacturing Co. (TSM) is doing with its second plant in Kumamoto, Japan, according to a Nikkei Asia report Thursday.
The facility, which broke ground in late October, was originally designed to produce 6-nanometer and 7-nanometer chips. But TSMC is now reportedly contemplating a shift to 4-nanometer production instead. For the uninitiated, smaller nanometer sizes mean more advanced and powerful chips, which is precisely what AI applications are hungering for right now.
Construction on Hold as Plans Get Rewritten
Here's where things get interesting. Construction at the second Kumamoto plant has already been paused, with heavy machinery being removed from the site. TSMC is also delaying equipment installation at its existing Kumamoto facility, which currently manufactures mature chips for industrial, consumer electronics, and automotive applications.
The potential transition would likely require design revisions and could push back the plant's planned 2027 launch date. But this isn't TSMC's first rodeo when it comes to pivoting mid-project. The company previously revamped plans for a facility in Kaohsiung, shifting from 6nm and 28nm production to the far more advanced 2-nanometer technology. When market conditions change, TSMC adjusts accordingly.
The company didn't immediately respond to requests for comment on the reported changes.
The AI Chip Shortage Nobody Saw Coming
The driving force behind all this replanning? Surging demand for AI-related products that has essentially consumed every available square inch of TSMC's production capacity. The company is scrambling to expand its 2-nanometer chip production from seven to ten fabrication facilities. That's a $28 billion investment concentrated in Tainan's Southern Science Park, adding three fabs to complement existing sites in Hsinchu and Kaohsiung. Production could start by 2026, with total monthly output exceeding 100,000 wafers.
The customer list reads like a who's who of tech. Nvidia Corp. (NVDA), Alphabet Inc. (GOOGL) (GOOG) Google, Amazon.com Inc. (AMZN), and MediaTek are all racing to lock down capacity for next-generation AI chips. Despite TSMC's aggressive expansion efforts, the company reportedly has no spare room left.
Even Elon Musk is feeling the squeeze. He recently said Tesla Inc. (TSLA) is pressuring its chip suppliers to accelerate production well beyond normal semiconductor timelines to support the company's next-gen AI hardware plans. Musk praised TSMC and Samsung Electronics Co. (SSNLF) for "moving like lightning," but cautioned that even their rapid pace could become a bottleneck if they can't keep up with Tesla's surging AI chip requirements.
Strong Revenue Performance Amid Expansion Push
On Wednesday, TSMC reported net revenue of NT$343.61 billion ($11.01 billion), representing a 24.5% year-over-year increase though down 6.5% from the previous month. For the January through November period, revenue reached NT$3.47 trillion, marking an impressive 32.8% year-over-year jump.
The numbers reflect a company firing on all cylinders. Market data place TSMC in the 93rd percentile for quality and the 86th percentile for growth, showcasing its dominant position in both operational excellence and expansion trajectory.
Price Action: Year-to-date, TSMC stock has climbed 53.85%. On Tuesday, shares fell 2.22% to close at $310.14.
