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Taiwan Semiconductor Manufacturing Company (NYSE: TSM) Growth Outlook
Taiwan Semiconductor Manufacturing Company (TSMC) reported quarterly revenues exceeding $30 billion, with analysts expecting mid-teens to over 20% growth through 2026. The growth rate appears smaller due to the sheer scale of revenue, but actual demand, especially for AI-related chips, remains robust. The bottleneck in production is attributed to advanced packaging, specifically the Chip-on-wafer-on-substrate (CoWoS) process, rather than a decline in market demand.
Bottleneck in Advanced Packaging
TSMC’s advanced packaging capabilities are fully booked through 2026, primarily catering to customers like Nvidia, AMD, and other AI model developers. Powertech and Advanced Semiconductor Engineering (ASE) are expanding to support this demand overflow, as TSMC focuses on retaining its advanced packaging operations. TSMC currently controls approximately 70% of the global foundry market, emphasizing its strategic positioning amidst rising AI demand.
Long-Term Strategy
TSMC plans to expand its packaging facilities globally, with initiatives in Arizona and Japan aimed at streamlining production closer to clients, thus mitigating current assembly delays. As TSMC increases its packaging capabilities, the anticipated constraints are expected to ease, setting the stage for future AI growth. The current situation is characterized as an “AI traffic jam,” signifying a robust ongoing demand rather than an industry slowdown.
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