According to Bloomberg citing UBS forecasts, Taiwan Semiconductor Manufacturing Company (TSMC) could spend up to US$37 billion in capex in 2025, marking a 15.6% YoY increase from the projected US$32 billion in 2024. This surge is reportedly driven by continued investment in advanced processes, particularly the 2nm technology, and higher-than-expected demand for 2nm production capacity.
Industry experts believe that this massive investment in 2nm technology is not just about increasing capacity; it's a strategic move to maintain TSMC's technological edge in the fiercely competitive semiconductor industry. These moves are setting up the stage for what industry insiders call a potential "foundry bloodbath" in 2025.
Players in the upcoming 2nm node battlefield
Samsung Electronics, TSMC's primary rival, is similarly aiming to begin mass production of 2nm chips in 2025. Samsung has been using the gate-all-around (GAA) architecture for its 3nm processes, a transistor technology that is currently indispensable in the upcoming 2nm node process. Samsung's new-gen GAA development causes industry experts to speculate whether it will give Samsung the upper hand over TSMC, which has been using the FinFET architecture for its 5nm and 3nm nodes until recently.
Seemingly away from the spotlight is Intel, which plans to leapfrog both leading foundries by releasing its 15th-gen CPUs, codenamed "Arrow Lake," by the end of Q3. Because Arrow Lake is expected to use Intel's 20A (2nm-equivalent) process node, Intel would essentially beat TSMC and Samsung to the 2nm party with this timely release. According to Wccftech citing Intel's senior VP, Sanjay Natarajan, the 20A process will allow Intel to "lead the way in miniaturization."
TSMC's 2nm node investment portfolio
The ramifications of TSMC's increased spending are far-reaching, with potential benefits for equipment suppliers such as ASML and Applied Materials. According to DIGITIMES reports, TSMC will gradually ready a total of six fabs in Taiwan for the 2nm process in 2025 and onwards. In addition, TSMC Arizona will reportedly join the 2nm generation as well.
TSMC's investment in extreme ultraviolet (EUV) lithography machines also reflects TSMC's commitment to the 2nm and sub-2nm technologies. According to Reuters, ASML will deliver a total of 60 EUV machines to TSMC by next year, a sale worth around US$12.3 billion combined.
EUV machines are advanced lithography systems that use extreme ultraviolet light to create extremely fine patterns on semiconductor wafers, enabling the production of cutting-edge microchips with higher performance and efficiency.
Financial outlook and competitive landscape
Looking ahead to 2025 and beyond, TSMC's financial performance outlook appears strong. According to UBS, the demand for 3nm will remain robust for the rest of the year, driven by the N3E process used for the iPhone 16 processors, scheduled for release in late Q3 2024. Higher 5nm capacity utilization is also driven by Nvidia and Apple's advanced process needs.
The semiconductor industry is poised for intense competition in 2025, with TSMC, Samsung, and Intel all vying for dominance in 2nm chip production. TSMC's substantial investment in advanced processes and capacity expansion, coupled with Samsung's GAA architecture and Intel's ambitious 20A process, sets the stage for a potential investment race that could reshape the industry landscape.
Source: Bloomberg July 2024
