Core Insights - Taiwan Semiconductor Manufacturing Company (TSMC) is making a significant investment of $100 billion in the United States, raising its total planned U.S. expenditure to $165 billion, which includes five wafer fabs, two advanced packaging plants, and a major research and development center [1][11] - TSMC is also expanding its manufacturing capabilities in Japan and Germany, with plans to build 11 wafer manufacturing fabs and four advanced packaging facilities in Taiwan over the next several years [3][11] - The expansion aims to secure leadership in advanced chip manufacturing and address geopolitical concerns regarding supply chain diversification [4][11] Investment and Financial Outlook - TSMC expects a gross margin decline of 2-3% in 2025 due to the ramp-up of new fabs, with further dilution anticipated to widen to 3-4% annually in subsequent years [4][11] - The company has planned capital expenditures (CapEx) of $38-$42 billion for 2025, emphasizing the importance of execution and cost discipline to protect margins [5] - Despite the anticipated margin pressures, TSMC remains confident in sustaining a long-term gross margin above 53% [5] Competitive Landscape - TSMC leads the global foundry market, but competitors like Intel and GlobalFoundries are increasing their efforts in localized chip manufacturing [6][8] - Intel is investing $100 billion in new fabs in the U.S. and Europe under its IDM 2.0 strategy, aiming to compete directly with TSMC [7] - GlobalFoundries is expanding its capacity in the U.S., Germany, and Singapore to meet demand for automotive, IoT, and industrial chips, positioning itself as a trusted local manufacturing partner [8] Market Performance - TSMC shares have gained 12.1% year to date, outperforming the Semiconductor - Circuit Foundry industry's growth of 7.1% [9] - The forward price-to-sales ratio for TSMC is 8.62X, which is in line with the industry's average [12] - Zacks Consensus Estimate indicates TSMC's earnings growth of 31.82% for 2025 and 15.82% for 2026, with upward revisions in estimates over the past 30 days [15]
TSM's Global Expansion Strategy: Growth Enabler or Margin Risk?