TSMC CoWoS, Foundry Capacity and AI Chip Supply — 2026-10-18
TSMC reported a sixth consecutive record quarter with revenue hitting $46.87 billion, driven by insatiable AI demand that continues to outpace supply. The company confirmed it is exploring a Texas expansion to meet customer needs and has secured Japanese approval for its Kumamoto Fab 2 to upgrade to 3nm production. Meanwhile, advanced packaging remains the critical bottleneck, with capacity spilling over to partners like GlobalFoundries and OSATs as NVIDIA, Apple, and AMD compete for limited slots. <!-- /headline -->
TSMC CoWoS, Foundry Capacity and AI Chip Supply — 2026-10-18
TSMC reported a sixth consecutive record quarter with revenue hitting $46.87 billion, driven by insatiable AI demand that continues to outpace supply. The company confirmed it is exploring a Texas expansion to meet customer needs and has secured Japanese approval for its Kumamoto Fab 2 to upgrade to 3nm production. Meanwhile, advanced packaging remains the critical bottleneck, with capacity spilling over to partners like GlobalFoundries and OSATs as NVIDIA, Apple, and AMD compete for limited slots.
<!-- /headline -->Top developments
TSMC Q3 Record Profit and AI Demand Outstripping Supply
On October 15, 2026, TSMC announced its Q3 2026 results, marking the sixth straight quarter of record profits. Revenue surged 41.1% year-over-year to $46.87 billion, with net income reaching NT$763.1 billion. CEO C.C. Wei stated that AI chip demand remains far above what the company can currently supply, reinforcing the narrative that the AI boom is running longer than anticipated. This performance underscores TSMC's central role in the global AI infrastructure buildout, where capacity allocation is becoming a fierce battleground among major tech clients.
Japan Approves Kumamoto Fab 2 Upgrade to 3nm
The Japanese Ministry of Economy, Trade and Industry (METI) officially approved TSMC’s plan to upgrade its Kumamoto Fab 2 to produce 3nm advanced semiconductors on October 16. This marks the first time 3nm process chips will be manufactured in Japan. The facility, originally planned for 6nm and 12nm nodes, is now scheduled to begin production in December 2028. This move significantly advances Japan's semiconductor strategy and expands TSMC's advanced node footprint outside of Taiwan.
TSMC Explores Texas Expansion for AI Chip Capacity
TSMC is actively exploring an expansion into Texas to secure additional wafer capacity for AI chips, potentially extending its US manufacturing footprint beyond Arizona. Discussions with customers are underway to meet the surging demand that has outpaced current production capabilities. This exploration signals TSMC’s commitment to diversifying its geographic risk and meeting the specific needs of US-based AI clients who require domestic supply chain assurance.
CoWoS Supply Gap Narrowing as Capacity Expands
Despite the intense competition for chips, the supply-demand gap for CoWoS (Chip-on-Wafer-on-Substrate) advanced packaging is reportedly narrowing. Goldman Sachs projects TSMC’s CoWoS capacity to reach 1.275 million wafers in 2026 (approx. 106,000 per month), with a projected 114% year-over-year surge to 2.73 million wafers in 2027. However, demand remains so high that overflow orders are flowing to partners like GlobalFoundries, Amkor, and OSATs, indicating that even aggressive capacity expansion is struggling to fully satisfy the market.
Local view
United Daily News (UDN) reported that TSMC Chairman C.C. Wei emphasized during the earnings call that CoWoS remains the customers' preferred choice for advanced packaging, with the company having actually mass-produced 5x reticle size interposers. UDN highlighted that despite the fierce competition from Intel’s EMIB and other technologies, TSMC’s ecosystem and yield rates keep it as the dominant force.
Setn News noted that ASE (Advanced Semiconductor Engineering) is benefiting significantly from TSMC’s CoWoS capacity overflow and Google’s TPU orders. Analysts raised ASE’s target price to NT$800, citing the strong performance of AI chip demand and the company’s expanding capital expenditure on new production lines. This reflects the broader trend where local Taiwanese OSATs are critical in alleviating the packaging bottleneck for TSMC’s primary clients.
Context & numbers
- Q3 2026 Revenue: $46.87 billion (USD), up 41.1% YoY and 16.2% QoQ.
- Q3 2026 EPS: NT$29.43.
- Gross Margin: 66.4% for Q3, with Q4 guidance expecting a slight dip to 66% due to costs from overseas fab ramp-ups.
- 2026 Capex Guidance: Raised to $60–$64 billion, primarily for 3nm expansion, 2nm mass production, and CoWoS packaging. Forecasts for 2028 capex have reached US$105 billion.
- CoWoS Capacity: Projected to reach ~106,000 wafers/month in 2026, rising to ~227,500 wafers/month in 2027.
On the radar
- Arizona Fab 2 Mass Production: TSMC confirmed that the second fab in Arizona is on track to begin mass production in Q3 2027, slightly ahead of previous schedules.
- Intel Backup Role: CEO C.C. Wei hinted that TSMC could step in to support customers if Intel’s advanced packaging ramp-up falls short, suggesting a potential collaborative or competitive dynamic in the advanced packaging space.
- Texas Site Selection: Watch for official announcements regarding the specific site and timeline for the potential Texas expansion, which would mark a significant shift in TSMC’s US strategy beyond Arizona.
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