TSMC is the real Backbone of the AI Economy

The key Semiconductor news still revolves around what TSMC does. Honorable mention to Chinese Semiconductor and AI chip firms going public. Intel's comeback? 🤯

It’s been a while since we reported on the Semiconductor News and trends. Welcome to 2026. The new day this Newsletter goes out will be on Fridays, hopefully aiming for for a 9 to 11AM time (Eastern Standard Time) Email send. Which gives me the entire day in East Asia to work on it and add little details I find relevant.

I’m in Taiwan and my eyes are often gravitating back to TSMC. Not just by proximity but by the strength of their corporate updates. The U.S. has lowered Taiwan’s tariffs which is a big deal. In return, Taiwan is commiing $250 billion to U.S. investment as part of a trade agreement.

A man walks past a TSMC logo at Hsinchu Science Park in Hsinchu, Taiwan April 15, 2025. Ann Wang | Reuters

It’s clear the U.S. is working very closely with TSMC and Taiwan now. The U.S. lowering tariffs on Taiwanese imports to 15% from 20%, and removing them altogether on other products, such as generic pharmaceuticals and aircraft components. The U.S. keeps ramping up weapons sales to Taiwan as well. The U.S. recently approved its largest-ever arms sale to Taiwan, an $11.1 billion package including HIMARS launchers, ATACMS missiles, howitzers, and drones. The invasion and blockade watch really starts July, 2027 essentially just 18 months from now.

So essentially TSMC said advanced chips measuring 7-nanometer or smaller made up 77% of total wafer revenue during the quarter, as demand from AI servers remains strong. Their lead in this domain keeps growing with the ability to increases prices due to over-demand.

TSMC also said it’s raising its expected capital expenditure for 2026, indicating that demand for artificial intelligence remains high this year. TSMC’s capex is indeed getting pretty heavyweight. The primary takeaway is a 27–37% year-over-year increase in spending for 2026.

TSMC’s Capex is Entering BigTech Levels

TSMC’s Investment in Arizona Adding up

TSMC is investing US$65 billion to build three fabs in Arizona, with the first having started commercial production in the fourth quarter of 2024. The chipmaker has also pledged to invest an additional US$100 billion to build three more fabs, two IC assembly plants and a research and development center.

TSMC Chief Financial Officer Wendell Huang said the firm would continue to ramp up its investments in Arizona.

TSMC has quickly become the Most Important Company in the world in the mid 2020s.

More or less the choke point for the AI bubble, if you think about it.

Nvidia isn’t just tethered to TSMC, the U.S. AI strategy of AI Infrastructure is tethered to Taiwan’s entire supply chain. Nobody is more important from a U.S. national defense standpoint than Taiwan’s talent that enables TSMC and those Arizona Fabs to run.

TSMC, The world’s largest contract chipmaker has now posted year-over-year profit growth for eight consecutive quarters.

In the Earnings call TSMC executives guided revenue for the current quarter to hit between $34.6 billion and $35.8 billion, up 4% sequentially, or up 38% year-over-year at the midpoint. Taiwanese talent at this firm are carrying the AI world on their backs, let’s not pretend otherwise. 🇹🇼 🏯 (A country that’s more different in basic values from China as New Zealanders are to Australia or Canadians are to Americans I might add). Even more startling Taiwan is a super-aged population, so its young people are that much more key.

How can an island of just 23.4 million manage this? It’s an incredible story. History is on the side of genius.

A “good”trade deal for a high price. U.S. takes TSMC monopoly under its wing. But who is it really good for? - US and Taiwan trade delegations sign trade agreement on Thursday. (Cabinet photo)