Taiwan Semiconductor to Reduce Fab14 Capacity by 15–20% to Fund Advanced Packaging
Taiwan Semiconductor will cut Fab14’s 12-inch mature-node capacity by 15–20% by 2028, removing about 50,000 wafers monthly to free space for advanced packaging. It will redeploy equipment to overseas fabs in Japan and Europe and use VIS for 130–40 nm production as part of its $52–56 billion 2026 capex plan.
1. TSMC Delivers Robust Q4 and Sets Ambitious Growth Targets
TSMC reported a 26% year-over-year increase in fourth-quarter revenue, capping a full-year 2025 sales rise of 36% to reach $122 billion. Management is forecasting 30% revenue growth for 2026 and is targeting a compound annual growth rate of 25% through 2029, underscoring confidence in sustained demand across its customer base.
2. Exceptional Profitability and Margin Expansion
Despite the capital-intensive nature of its foundry operations, TSMC expanded its gross margin from 59% in 2024 to 62.3% in 2025 and widened its operating margin from 49% to 54% over the same period. The company is guiding for first-quarter 2026 gross margins of 63–64% and long-term operating margins above 54%, reflecting disciplined cost management and high utilization of advanced fabs.
3. AI and High-Performance Computing Drive Capital Expenditure Increase
High-performance computing, including AI workloads, accounted for 58% of TSMC’s 2025 revenue and grew at 48% year over year. To meet escalating demand, TSMC raised its 2026 capex guidance to approximately $54 billion—up from $41 billion in 2025—with 70–80% allocated to advanced process technologies, positioning the company to capture the next wave of AI-led capacity expansion.
4. Valuation Remains Attractive Despite Strong Run
After a 54% stock surge in 2025, TSMC still trades at about 24 times forward earnings—essentially unchanged from the start of last year—and offers investors exposure to a projected 50%+ CAGR in AI chip revenue through 2029. The combination of rapid growth, leading process technology, and disciplined capital allocation supports the thesis that TSMC remains a high-conviction buy for long-term investors.