TSMC's CFO attended the Morgan Stanley TMT conference, explaining the impact of the $100 billion expansion in the U.S., AI demand, and CoWoS expansion, etc

At the recently held Morgan Stanley 2025 TMT Conference, TSMC Chief Financial Officer Jensen Huang engaged in in-depth discussions with analysts, revealing the company's latest strategic layout in the global semiconductor industry.

The core of this dialogue revolved around TSMC's $100 billion expansion plan in the United States, the sustainability of AI demand, the expansion of CoWoS capacity, and potential collaboration with Intel, among many other hot topics. Morgan Stanley's latest report summarizes the key points as follows:

Impact of the $100 Billion Expansion Plan

According to previous media reports, TSMC will reinvest "at least" $100 billion in the United States to build "the most advanced" chip manufacturing facilities. At this TMT conference, Jensen Huang clearly stated that TSMC's expansion plan is always customer demand-oriented. Currently, TSMC's first 4nm wafer fab in the United States has entered mass production, and plans for the second and third fabs may even be advanced. In the long term, once all six fabs are completed, U.S. production capacity will account for 20%-30% of global N2 and below processes.

TSMC expects that over the next five years, overseas factories will have a 2%-3% dilution effect on its profit margins. The production costs of U.S. factories are significantly higher than those in Taiwan, mainly due to smaller scale, higher labor costs, and an underdeveloped ecosystem. Nevertheless, Huang emphasized that as scale increases and the ecosystem improves, cost pressures will gradually ease. In the long term, TSMC aims to maintain a gross margin of over 53%.

Additionally, TSMC's customers are seeking flexibility in global manufacturing, which means U.S. customers may need to pay higher prices for wafers produced in the U.S. This pricing mechanism will become a key point in future negotiations.

CoWoS Expansion

AI demand remains a significant engine for TSMC's growth. Huang stated that by 2025, TSMC's CoWoS capacity will double again, having already achieved over a doubling in 2024. TSMC continuously monitors customer demand to ensure flexibility in capacity planning. This initiative not only meets the strong demand for AI chips but also provides strong support for TSMC's leading position in advanced processes.

TSMC plans to establish two backend packaging factories in the United States, likely located in Arizona, near its Giga Fab. Huang explained that as U.S. wafer production increases, it is reasonable to allocate some CoWoS capacity in the U.S. Additionally, TSMC has not yet decided on the specific location of its U.S. R&D center.

Potential Collaboration with Intel

In the earnings call for the first quarter of 2025, TSMC ruled out the possibility of acquiring Intel's factories or assets. However, Huang stated that TSMC has not completely closed the door on collaboration with Intel, indicating that any partnership would be predicated on maximizing shareholder interests. Notably, the operation of U.S. factories will consume a significant amount of TSMC's management and human resources, suggesting that future collaboration may be more flexible.

Long-term Growth Outlook

Huang reiterated TSMC's forecast of "close to 20% compound annual growth rate (CAGR)" over the next five years, with the growth rate for cloud AI semiconductors (including AI accelerators and memory controllers) expected to exceed 40% Despite the relatively limited growth prospects for non-cloud AI businesses, the semiconductor content in devices such as smartphones and the Internet of Things (IoT) is expected to increase significantly due to the trend of edge computing.

Government Subsidies and Customer Demand Support U.S. Production

Taiwan Semiconductor received $1.5 billion in CHIPS Act subsidies in the fourth quarter of 2024, and whether it will receive more subsidies in the future will depend on U.S. government policy. Although Jensen Huang did not comment on potential U.S. tariffs, he stated that the demand from TSMC's major customers (such as Apple, NVIDIA, AMD, Qualcomm, and Broadcom) for domestic production in the U.S. is expected to be strong enough to support the operation of its U.S. factories.

New Node Production

Jensen Huang indicated that new process nodes (such as A16 and A14) will be prioritized for production in Taiwan to more effectively increase capacity. This will shorten the time for new technology nodes to be introduced in overseas factories (such as in the U.S.), ensuring TSMC's leading position in global technological competition.

Moore's Law and Demand

In the fields of HPC (high-performance computing) and smartphones, TSMC believes that customer demand is the main driving force behind node upgrades. Although TSMC is not the earliest adopter of low numerical aperture (low-NA) EUV or GAA technology, its technological leadership remains solid.

At the end of the report, Morgan Stanley reiterated its "Overweight" rating on TSMC, stating that the expansion of U.S. factories is expected to alleviate investor concerns about potential tariffs and collaboration with Intel