Semiconductor industry enters unprecedented ‘giga cycle’ as AI infrastructure spending reshapes demand, says report
Without any doubt, Intel's ramping up of Panther Lake on its leading-edge 18A (1.8nm-class) process technology is an impressive achievement. However, for now, only Intel can build chips on 18A. By contrast, TSMC has multiple alpha customers with its N2 node, who have worked on their chips for years. The message that C.C. Wei sent is that leading-edge foundry competition is constrained by time, not by capital. He said, "it is not money to help you to compete," pushing back against the idea that government support or large investments can instantly create competitiveness at advanced nodes.
C.C. Wei recalled that it takes between two and three years for customers to learn how to design a complex chip on a new process and work closely with the chipmaker on DTCO (design technology co-optimization), followed by another one or two years to qualify and ramp it into high-volume production.
"Today's [leading-edge] technology is so complicated [that] once you want to design [a chip], it takes two to three years to fully utilize that technology," said Wei. "After two to three years of preparation, you can design your product. Once you get your product being approved, it takes another one to two years to ramp it up."
That means even if customers like Apple or Nvidia chose today to use Intel Foundry at the leading-edge, any meaningful commercial impact would likely appear around 2028 – 2030 (both for 18A and 14A), not in the near term. Furthermore, porting a leading-edge design from one foundry to another is an extremely complex task since things like standard-cell libraries, third-party IP blocks, power-delivery techniques, timings, and yield learnings are tightly coupled to a specific manufacturing process, which means that porting equals designing and validating from scratch, something that takes years, costs millions, and there is no guarantee of success.
"So, we have a competitor, no doubt about it, that is a formidable competitor," Wei added. "But first, it takes time. Two, we do not underestimate their progress, but are we afraid of it? For 30-some years, we are always in a competition with our competitors, so no, we have confidence to keep our business grow as we estimate."
Interestingly, the timeline presented by Wei mirrors TSMC's own outlook, where the next two years are about squeezing more output from existing fabs by ramping up N2-capable capacity in Taiwan and by converting N5-capable fabs to N3-capable fabs, while several all-new fabs are set to come online only in 2028 – 2029.
Throughout its history, TSMC has had impressive rivals like IBM , UMC, and Samsung, which TSMC has managed to leave behind. But the complexity of the semiconductor industry in general and leading-edge process technologies in particular is so high today that matching TSMC is not about achieving similar transistor performance, power, and density, but about building an entire development ecosystem that spans from defining a new node with a customer (or customers in case of N2 and A16) and partners to helping them design and optimize their chip and then assisting them with volume ramp it five or six years down the road.
The bottom line about today's leading-edge nodes is that this is a long-term commitment that takes time and a lot of money, and no short-term or mid-term investments from reputable entities can change that.
TSMC earned $33.73 billion in revenue for the fourth quarter of 2025, up 20.5% year-over-year, the company's highest quarter revenue ever. The company's gross margin reached 62.3% (up from 59% in Q4 2024) amid the building of multiple manufacturing facilities and ramping up production on TSMC's all-new N2 fabrication process, which typically hurts margins significantly. The foundry's net income reached around $16.012 billion, which also happens to be a record. As for the results for the whole year, TSMC earned $122.42 billion in revenue and $55.133 billion in net income.
It is noteworthy that despite posting the company's best quarter results ever, TSMC's management is confident that the company will earn between $34.6 billion and $35.8 billion in the first quarter, which is traditionally a slow quarter for electronics in general and microelectronics specifically.
*HPC is a vague term TSMC uses to describe everything from laptop CPUs to high-end AI accelerators.
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Anton Shilov is a contributing writer at Tom\u2019s Hardware. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends. ","collapsible":{"enabled":true,"maxHeight":250,"readMoreText":"Read more","readLessText":"Read less"}}), "https://slice.vanilla.futurecdn.net/13-4-11/js/authorBio.js"); } else { console.error('%c FTE ','background: #9306F9; color: #ffffff','no lazy slice hydration function available'); } Anton Shilov Social Links Navigation Contributing Writer Anton Shilov is a contributing writer at Tom’s Hardware. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends.
Notton At this point in time, since the shortage is DRAM and NAND, is there any point to increasing production of processors? Reply
Eximo If the AI bubble pops, there will be less demand for the memory hungry AI chips. I don't think TSMC has to be too worried, though other fabs spooling up in the meantime is probably a greater concern. So they might come out on the other side of this with their additional fab space, Intel's additional fab space, and mainland China getting their fabs up and running. They have more demand than capacity. I think the concern would be getting used to it and then the demand suddenly shifting which would mean they would have to drop wafer price. They are banking on their returns covering the new fabs they built. Reply
bigdragon I don't think TSMC would be affected much by the AI bubble popping. Investors would try to create a new bubble to replace the AI bubble just like what they did with crypto, blockchain, big data, web 2.0, and other past tech crazes. Someone is always going to be reliant on the services and technologies TSMC produces. I think the biggest threat to TSMC is lack of investment in fabs outside of Taiwan. Geopolitical tensions are likely to get worse over the next decade instead of better — especially if there's a currency crisis that breaks out in one or more heavily-indebted global powers. Regional diversity would help TSMC weather such a crisis. Reply
Eximo TSMC has a working facility in Arizona (that broke ground in 2022, they started producing last year I believe), it is building another more up to date fab there as well. Should be one node behind the main fab in Taiwan when done. One under construction in Japan (joint venture with Sony). They are also building a less advanced node in Germany for the automotive industry. They aren't exactly sitting still on that front. Reply
ravewulf I know nothing but I hope lower consumer purchases from the RAM and NAND shortages puts pressure on the AI bubble. When it pops, RAM prices should go down and consumer purchases will rise again for a new upgrade cycle, so potentially less of an impact on TSMC vs on the DRAM market. Reply
Key considerations
- Investor positioning can change fast
- Volatility remains possible near catalysts
- Macro rates and liquidity can dominate flows
Reference reading
- https://www.tomshardware.com/tech-industry/semiconductors/SPONSORED_LINK_URL
- https://www.tomshardware.com/tech-industry/semiconductors/tsmc-very-nervous-about-ai-bubble-concerns-despite-another-record-setting-quarter-but-assured-of-demand-ceo-says-careless-investment-would-be-a-disaster-for-tsmc-for-sure-company-will-invest-usd52-usd56-billion-in-capex#main
- https://www.tomshardware.com
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Informational only. No financial advice. Do your own research.