TSMC invests billions in plant upgrade in Japan
Taiwan Semiconductor Manufacturing Company (TSMC) will start mass production of advanced three-nanometre chips at its factory in Kumamoto, southwest Japan.
Chief Executive C.C. Wei made the announcement on Thursday to a delighted Japanese Prime Minister Sanae Takaichi in Tokyo, an ideal gift before the country’s general election on Sunday.
TSMC began mass production at its first plant in Kumamoto in late 2024. The three-nano chips will be made at its second fab at the site which is due to come on line in late 2027.
The significance of the news is that the technology of the chips to be made there is higher than the six- to twelve-nano chips the company originally planned to produce there. “We are seeking to meet soaring demand for AI chips,” Wei said. “This fab will further contribute to local economic growth and, most importantly, form a foundation for Japan’s AI business.”
The advanced three-nano chips are widely used in high-performance and AI servers.
TSMC did not give an investment figure. Yomiuri Shimbun, one of Japan’s biggest newspapers, put the figure at US$17 billion.
Takaichi said: “the TSMC plant is a template for economic cooperation and shores up the global chip supply chain and Japan’s economic society. We want to strengthen our win-win partnership.”
In response, Wei said; “Without your support, this giga-fab project would not be possible.” The fact that Takaichi received Wei in person showed the importance her government attaches to TSMC’s investment.
The Kumamoto plant is part of TSMC’s ambitious global expansion. It is investing US$165 billion in the U.S., the biggest single foreign investment in the nation’s history. They include five wafer fabs, two advanced packaging plants, and a research & development centre.
In August 2024, TSCM broke ground on its first facility in Europe, an US$11 billion fabrication plant in Dresden, Germany. TSMC holds a 70% stake in the venture, called the European Semiconductor Manufacturing Company. The venture will receive subsidies worth roughly half the total investment from the German government.
The company also plans to build 11 wafer manufacturing fabs and four advanced packaging facilities in Taiwan over the next several years.
These giant overseas investments have aroused fears among the Taiwan government and people that the company is outsourcing its production. Not so, says the company. It has repeatedly said that it will keep its most cutting-edge technology at home. “The company intends to add capacity for more mature semiconductors overseas to alleviate resource constraints at home,” it said.
Executive Yuan spokeswoman Michelle Lee said: “All TSMC’s decisions are based on customer needs, and their overseas expansion is not intended to replace Taiwan.”
TSMC is able to finance these huge investments because of its booming balance sheet. Last month it announced 2025 revenue at NT$3,809.05 billion (US$120.6 billion), an increase of 31.6 percent compared to the same period in 2024. Net income jumped 46.4 percent to NT$1.7178 trillion (US$54.4 billion)
“Our business in the fourth quarter (2025) was supported by strong demand for our leading-edge process technologies,” said Wendell Huang, Senior VP and Chief Financial Officer of TSMC. “Moving into first quarter 2026, we expect our business to be supported by continued strong demand for our leading-edge process technologies.”
The company said that management expected the overall performance for first quarter 2026 to be as follows:
• Revenue between US$34.6 billion and US$35.8 billion;
And, based on the exchange rate assumption of US$1 US to NT$31.6, gross profit margin is expected to be between 63 per cent and 65 per cent and operating profit margin expected to be between 54 per cent and 56 per cent.
On Friday, the Semiconductor Industry Association in the U.S. said that, having delivered a record performance in 2025 with annual revenue reaching $791.7 billion, up 25.6 per cent from the previous year, the global semiconductor industry is on track to top $1 trillion in sales in 2026.
“The record revenue will be driven by demand from the AI sector and, to some degree, elevated prices on virtually all types of microelectronics. The global semiconductor industry posted its highest-ever annual sales in 2025, nearly hitting $800 billion," said John Neuffer, SIA president and CEO.
"Semiconductors are the foundation of nearly all modern technology, and emerging technologies like AI, IoT, 6G, autonomous driving, and others will continue to drive robust demand for chips," he said.
Is TSMC the world’s most valuable company?
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