TSM's Global Expansion Strategy: Growth Enabler or Margin Risk?
Taiwan Semiconductor Manufacturing Company TSM, also known as TSMC, is aggressively expanding its global manufacturing footprint. In March 2025, it announced a new $100 billion investment in the United States, raising its total planned U.S. spend to $165 billion. This includes five wafer fabs, two advanced packaging plants, and a major research & development center. It's one of the most ambitious expansions in chip history.
Construction on the first U.S. fab is done, and volume production is being sped up to meet soaring AI demand. Two more fabs are in the pipeline for later this year, pending permits, with the remaining facilities set to adopt advanced nodes based on customer needs.
Apart from expanding in the United States, Taiwan Semiconductor Manufacturing is ramping up its fabs in Japan and Germany. It also plans to build 11 wafer manufacturing fabs and four advanced packaging facilities in Taiwan over the next several years.
This global push is clearly aimed at securing leadership in advanced chip manufacturing and addressing geopolitical concerns from customers who want supply chain diversification. However, this massive investment strategy is anticipated to hurt Taiwan Semiconductor Manufacturing's profitability. TSMC expects gross margins to shrink 2-3% in 2025 as it ramps up new fabs in Arizona and Kumamoto, Japan. It also expects the gross margin dilution widening to 3-4% annually in later years due to the ramp-up of its other overseas fabs.
With $38-$42 billion in CapEx planned for 2025, the company's execution and cost discipline will be critical for protecting margins. Nonetheless, Taiwan Semiconductor Manufacturing remains confident of sustaining a long-term gross margin above 53%.
How TSMC's Rivals are Responding to the Global Fab Race
While Taiwan Semiconductor Manufacturing leads the global foundry market, Intel INTC and GlobalFoundries GFS are stepping up their efforts as the demand for localized chip manufacturing grows.
Intel is undergoing a major transformation under its IDM 2.0 strategy. With a planned investment of $100 billion for new fabs in the United States and Europe, Intel aims to compete directly with Taiwan Semiconductor Manufacturing in advanced chip production. Its upcoming foundry services, backed by U.S. government support, are designed to appeal to customers looking for geopolitically safer and more diversified supply chains.
GlobalFoundries is carving out its space in mature and specialized nodes. It is expanding capacity in the United States, Germany, and Singapore to meet demand for automotive, IoT, and industrial chips. As clients seek trusted, local manufacturing partners, GlobalFoundries stands to benefit.
TSMC's edge remains strong, but both Intel and GlobalFoundries are making moves that could tighten the competitive landscape.
TSM's Price Performance, Valuation and Estimates
Shares of Taiwan Semiconductor Manufacturing have gained 12.1% year to date compared with the Semiconductor - Circuit Foundry industry's growth of 7.1%.
TSM YTD Price Return Performance
From a valuation standpoint, TSMC trades at a forward price-to-sales ratio of 8.62X, in line with the industry's average.
TSM Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for TSMC's 2025 and 2026 earnings implies year-over-year growth of 31.82% and 15.82%, respectively. The estimates for 2025 and 2026 have been revised upward in the past 30 days, respectively.
Taiwan Semiconductor Manufacturing currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Only $1 to See All Zacks' Buys and Sells
We're not kidding.
Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.
Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators, and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.
See Stocks Now >>
Click to get this free report
Intel Corporation (INTC): Free Stock Analysis Report
GlobalFoundries Inc. (GFS): Free Stock Analysis Report
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
CTV News
2 hours ago
- CTV News
Kirkland Lake hit by fourth water main break in a week
Some homes and businesses lost water service Friday after the town's fourth water main rupture in a week. The latest break hit Chateau Drive, following others on Al Wende Avenue and at Bloomfield Road. Mayor Stacy Wight said aging infrastructure is a known issue, with repairs slowed by funding gaps.
Globe and Mail
3 hours ago
- Globe and Mail
G7 agrees to exempt U.S. companies from higher taxes
The United States and the Group of Seven nations have agreed to support a proposal that would exempt U.S. companies from some components of an existing global agreement, the G7 said in a statement on Saturday. The group has created a 'side-by-side' system in response to the U.S. administration agreeing to scrap the Section 899 retaliatory tax proposal from President Donald Trump's tax and spending bill, it said in a statement from Canada, the head of the rolling G7 presidency. The G7 said the plan recognizes existing U.S. minimum tax laws and aims to bring more stability to the international tax system. Opinion: The G7 is dead – time to move on to the G6 U.K. businesses are also spared higher taxes after the removal of Section 899 from Mr. Trump's tax and spending bill. Britain said businesses would benefit from greater certainty and stability following the agreement. Some British businesses had in recent weeks said they were worried about paying substantial additional tax due to the inclusion of Section 899, which has now been removed. 'Today's agreement provides much-needed certainty and stability for those businesses after they had raised their concerns,' Britain's finance minister Rachel Reeves said in a statement, adding that more work was needed to tackle aggressive tax planning and avoidance. G7 officials said that they look forward to discussing a solution that is 'acceptable and implementable to all.' In January, through an executive order, Trump declared that the global corporate minimum tax deal was not applicable in the U.S., effectively pulling out of the landmark 2021 arrangement negotiated by the Biden administration with nearly 140 countries. He had also vowed to impose a retaliatory tax against countries that impose taxes on U.S. firms under the 2021 global tax agreement. This tax was considered detrimental to many foreign companies operating in the U.S.
CTV News
4 hours ago
- CTV News
Japan launches a climate change monitoring satellite on mainstay H2A rocket's last flight
TOKYO — Japan on Sunday launched a satellite to monitor greenhouse gas emissions using its mainstay H-2A rocket, which made its final flight before it is replaced by a new flagship designed to be more cost competitive in the global space market. The H-2A rocket successfully lifted off from the Tanegashima Space Center in southwestern Japan, carrying the GOSAT-GW satellite as part of Tokyo's effort to mitigate climate change. The satellite was released into orbit about 16 minutes later. Mitsubishi Heavy Industries, which operates the rocket launch, and Japan Aerospace Exploration Agency, will hold a news conference later Sunday to give further details of the flight. Sunday's launch marked the 50th and final flight for the H-2A, which has served as Japan's mainstay rocket to carry satellites and probes into space with a near-perfect record since its 2001 debut. After its retirement, it will be fully replaced by the H3, which is already in operation, as Japan's new main flagship. The launch follows several days of delays because of malfunctioning of the rocket's electrical systems. The GOSAT-GW, or Global Observing SATellite for Greenhouse gases and Water cycle, is a third series in the mission to monitor carbon, methane and other greenhouse gasses in the atmosphere. It will start distributing data in about one year, officials said. The liquid-fuel H-2A rocket with two solid-fuel sub-rockets developed by Japan Aerospace Exploration Agency has so far had 49 flights with a 98% success record, with only one failure in 2003. Mitsubishi Heavy Industries has provided its launch operation since 2007. H-2A successfully carried into space Japan's moon lander SLIM last year, and a popular Hayabusa2 spacecraft in 2014 to reach a distant asteroid, contributing to the country's space programs. Japan sees a stable, commercially competitive space transport capability as key to its space program and national security, and has been developing two new flagship rockets as successors of the H-2A series — the larger H3 with Mitsubishi, and a much smaller Epsilon system with the aerospace unit of the heavy machinery maker IHI. It hopes to cater to diverse customer needs and improve its position in the growing satellite launch market. The H3, is designed to carry larger payloads than the H-2A at about half its launch cost to be globally competitive, though officials say more cost reduction efforts are needed to achieve better price competitiveness in the global market. The H3 has made four consecutive successful flights after a failed debut attempt in 2023, when the rocket had to be destroyed with its payload. Mari Yamaguchi, The Associated Press
