TSMC To Bump Spending To Record Levels In 2025 Due To Strong 2nm Demand – Report
Ramish Zafar
Jul 1, 2024 11:58 AM EDT
Fresh reports from Taiwan suggest that the Taiwan Semiconductor Manufacturing Company (TSMC) is all set to grow its capital expenditure next year on the heels of strong demand for its 2-nanometer next generation semiconductor technology. TSMC holds a commanding market share in the contract chip fabrication market, which has jumped into the spotlight of global investing due to a surge in investor interest in artificial intelligence products. The Taiwanese sources suggest that TSMC's capital expenditure for 2025 could range between $32 billion to $36 billion to mark a 12.5% to 14.3% growth and mark the second highest amount in the firm's history.
Industry Rumors Hint At TSMC Expanding 2-nanometer Chip Production Across Taiwan
During TSMC's earnings call for the first quarter of 2024, management stressed that the firm's capital expenditure for 2024 will range between $28 billion and $32 billion. Executives shared that spending is determined by long term demand trends, and added that as much as 80% of the budget would be spent on manufacturing advanced chips such as 3-nanometer and 2-nanometer.
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Now, a fresh report from Taiwan claims that TSMC plans to aggressively grow its spending in 2025. The details suggest that the firm's 2025 capital expenditure will range between $32 billion and $36 billion and grow between 12.5% and 14.3%. This is because of strong demand for the 2-nanometer technology, which industry sources believe has solicited strong demand. Dutch semiconductor manufacturing equipment manufacturer ASML and the American chip design and testing technologies provider Applied Materials will be the main beneficiaries of this spending, according to the sources.
TSMC and ASML have made quite a bit of headlines this year because of the latter's advanced high-NA EUV chip manufacturing machines. While the chip manufacturer had initially balked at buying these expensive machines - which are critical for technologies of tomorrow - ASML later confirmed that TSMC had decided to order one scanner whose cost runs into hundreds of millions of dollars.
Taiwanese supply chain sources also believe that since TSMC is experiencing stronger than expected demand for its 2-nanometer products, the firm plans to add additional manufacturing capacity for the technology. This includes adding 2-nanometer capacity to its manufacturing site in Taiwan's Nan-Ke region, which will expand the 2-nanometer capacity already planned in a new facility in Zhuke Baoshan and a facility in Kaohsiung. Cumulatively, these will allow TSMC to make the advanced chips at eight factories spread all over Taiwan.
Sources also believe that even though TSMC will spend more through capital expenditure next year, it should not affect the firm's dividends. Its leading edge 3-nanometer and 5-nanometer process technologies are expected to contribute heftily to cash flow, and rumors also suggest that the strong demand for the 2-nanometer products is due to interest from non-Apple customers.
Since it primarily competes in the low power smartphone industry, Apple is able to use the earliest batches of TSMC's newest chips for its products. However, the 'non-Apple' customers mentioned in today's report include firms designing AI products. HPC chips, such as those used for AI workloads, are power intensive. Consequently, they take their time when adopting new technologies by allowing chip manufacturers to fine tune their products for the strenuous workloads. |
