TSMC moves the market again!
TSMC has just announced that its second Japanese fab in Kumamoto will start production on the most advanced 3nm process in 2028.
Originally, this fab was supposed to produce chips on significantly less advanced 6 to 12nm processes.
Japan’s multibillion-dollar bet
Total investment in both Japanese fabs is expected to exceed $20 billion. The second fab alone could cost about $17 billion, although TSMC has not officially confirmed that number.
The Japanese government has approved subsidies of up to $4.62 billion for the second fab.
The entire project is being led by TSMC’s subsidiary JASM, which was established in 2021 with the support of Sony $SONY and was later joined by DENSO $DNZOY and Toyota $TM.
The planned monthly capacity of the second fab is 15,000 twelve-inch wafers on the 3nm process, with both fabs together expected to reach a capacity of 100,000 wafers per month.
The numbers
TSMC’s annual revenue $TSM for 2025 reached $122.3 billion, representing a year-on-year increase of 38.5%. For comparison: in 2024 it was $88.3 billion and in 2023 "only" $70.6 billion. So revenues nearly doubled in just two years.
Gross margin in Q4 2025 climbed to 62.3% and operating margin reached 54%. EPS recorded a year-on-year increase of 46.4%.
Global expansion at scale
Japan is only one piece of the puzzle. In Arizona, TSMC is investing a total of $165 billion to build five new fabs and two packaging plants, making it the largest foreign direct investment in U.S. history. The first Arizona fab began mass production on the 4nm process at the start of 2025 and supplies key clients such as Apple $AAPL and Nvidia $NVDA.
The second fab is slated to begin high-volume production in the second half of 2027, and the third is already under construction. The company is also planning fabs in Germany and continuing expansion in Taiwan.
Capital expenditures (CapEx) for 2026 are set at $52 to $56 billion, an increase of 27% to 37% compared with last year’s roughly $41 billion. Approximately 70% to 80% of that will be directed to the most advanced 2nm and 1.6nm processes.
How the stock is doing
Forward P/E is approximately 23, which isn’t excessive for a company with such growth and market dominance. TSMC holds roughly a 70% share of the global foundry market.
Do you have $TSM in your portfolio, or are you betting more on its customers like $NVDA or $AMD?
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I would bet that most investors don't want to hold this stock in their portfolio purely because of the China risk and assume that it would "somehow" be resolved. I don't think so, but we'll see where Intel is in two or three years. Maybe their production will miraculously ramp up and within 10 years they'll have enough resources to expand manufacturing capacity to meet U.S. demand.
I'm betting on those customers, so I have a lot invested in $AMD. Companies like $TSM or $MU seem like great firms to me, but I don't have much room left in my portfolio and I can't have 200 positions😃.
I already own a lot of stocks, but it's true that the valuation $TSM isn't very high and it's one of the few cheaper stocks in this sector. Together with $ASML, this company has a huge competitive advantage and practically no competition.