Counterpoint: Strong demand, Taiwan Semiconductor's 3nm process becomes its fastest technology node to achieve full utilization in history

According to the Zhitong Finance APP, on May 15th, Counterpoint published an article stating that TSMC (TSM.US), the leading company in the global foundry market, has further consolidated its dominant position in the industry after inventory adjustments at the end of 2022. The utilization rate of advanced process capacity remains high, highlighting the company's technological advantages. According to data from Counterpoint, the 3nm process has achieved full capacity utilization in the fifth quarter after mass production, driven by the huge demand for Apple A17 Pro/A18 Pro chips, x86 PC processors, and other application processor chips (AP SoC), setting a new record for market demand in the early stages of advanced processes.

As for future development, the introduction of NVIDIA Rubin GPUs, along with the successive launch of dedicated AI chips such as Google TPU v7 and AWS Trainium 3, is expected to continue the current high capacity of advanced processes, driven by the sustained increase in demand for AI and high-performance computing (HPC) applications.

In contrast, the initial capacity growth of existing processes in the smartphone market (such as 7/6nm and 5/4nm) has been relatively slow. Although the 7/6nm process achieved full capacity utilization around 2020 due to a surge in smartphone demand, growth has since slowed; the 5/4nm process saw renewed growth in mid-2023 and continues to recover driven by the surge in demand for AI acceleration chips like NVIDIA H100, B100, B200, and GB200. The surge in demand for these AI computing chips has not only accelerated the construction of AI data centers but also significantly boosted the overall capacity of the 5/4nm process.

Regarding the development prospects of the 2nm process, we believe that this process is expected to achieve full capacity utilization in the fourth quarter after mass production, setting a new record for the commercialization of advanced processes. This prediction is based on the dual demand from smartphones and AI applications, which aligns with TSMC's strategic judgment in the Q1 2025 earnings call: "Thanks to the huge demand from smartphones and high-performance computing (HPC) applications, we expect the number of wafers for 2nm technology in the first two years to exceed the levels of 3nm and 5/4nm during the same period."

In addition to Apple, potential customers for 2nm technology include key manufacturers such as Qualcomm, MediaTek, Intel, and AMD. A broad customer base is expected to maintain high capacity utilization for the 2nm process.

To meet the growing demand from American consumers while mitigating geopolitical risks, Taiwan Semiconductor has invested $165 billion in its Arizona factory, which will not only cover 4nm and 3nm process technologies but also include 2nm and more advanced processes.

Although core R&D and process development are based in Taiwan, the expansion of operations to the United States could ultimately account for 30% of Taiwan Semiconductor's capacity for 2nm and below processes. This dual-layout strategy enhances Taiwan Semiconductor's geopolitical resilience, ensures that capacity keeps pace with customer demand (especially in the fields of AI and high-performance computing), and guarantees that the company maintains high utilization rates of its advanced processes beyond 2030