Taiwan Semiconductor Shrinks Old Chip Lines, Goes All-In On Next-Gen Tech

Core Viewpoint - Taiwan Semiconductor Manufacturing Company Ltd. is restructuring its mature-node manufacturing to optimize capital allocation and enhance manufacturing efficiency [1] Group 1: Capacity Adjustments - The company plans to reduce Fab14's 12-inch mature-node capacity by 15%–20% by 2028 to address low utilization rates at legacy nodes [2] - Taiwan Semiconductor expects to phase out approximately 50,000 wafers per month of Fab14 capacity by 2028, which will improve profitability and flexibility [7] Group 2: Utilization Rates and Demand - Utilization rates at 40–90nm nodes have remained around 80%, with limited signs of near-term recovery, while demand for advanced packaging is increasing [3] - The company is reallocating cleanroom space, equipment, and capital towards higher-value segments due to the strengthening demand for advanced packaging [3] Group 3: Overseas Manufacturing Strategy - To maintain supply continuity for customers reliant on mature and mid-range nodes, Taiwan Semiconductor is increasingly utilizing overseas fabs [4] - The Kumamoto fab in Japan is expected to ramp up 40/45nm and 12/16nm capacity by the end of 2026, while the Dresden fab in Europe is progressing towards equipment installation in 2027 [4] Group 4: Internal Collaboration - Taiwan Semiconductor's affiliate VIS will absorb part of the mature-node load by acquiring 12-inch tools to expand production at its Singapore-based facility [6] - This strategy allows Taiwan Semiconductor to focus on advanced logic and packaging while VIS addresses stable mature-node demand more efficiently [6] Group 5: Financial Performance - The company is undertaking a capital expenditure plan of $52 billion to $56 billion for 2026 [7] - Taiwan Semiconductor has seen a 45% increase in value over the last 12 months, with Nvidia overtaking Apple as its largest customer [7][8]