The world's largest chipmaker TSMC: AI revolution has just begun

After the quarterly figures on January 15, TSMC left little room for doubt. At the end of last year, the world's largest chip manufacturer posted the highest turnover and profit in its history. The reason is simple: demand for AI chips continues to grow. Faster than expected. Even more striking is the outlook. TSMC expects revenue growth of almost 30% by 2026. This is a clear indication that companies will continue to invest heavily in AI infrastructure. The conclusion is clear: AI is not a temporary boom.

Data centers and AI

The driving force behind these figures is undeniable. Demand for chips needed for data centers and AI accelerators is growing exponentially. While consumer electronics such as smartphones are showing stable but slow growth, demand in the business market is exploding. High Performance Computing (HPC), the category that includes AI chips, now accounts for 55% of total revenue. TSMC has effectively transformed itself from a supplier for your iPhone to the builder of the global AI infrastructure.

Why TSMC is dominant

To understand why TSMC is so dominant, we need to look at the technology itself. The so-called 3-nanometer and 5-nanometer technologies together accounted for 63% of total wafer revenue in the last quarter. This is crucial. The smaller the number, the more advanced and efficient the chip. For AI applications, this efficiency is vital. Training AI models consumes a significant amount of energy. Chips produced at 3 nanometers deliver more computing power per watt. Major customers such as Nvidia and Apple cannot do without this technology. TSMC is currently the only party in the world that can supply these chips on this scale and with this level of reliability.

2026: Scaling up 2-nanometer chips

Management has announced a substantial capital budget of between $52 billion and $56 billion for 2026. To put this into perspective, that is more than the GDP of many small countries. This money will not be used to pay dividends or buy back shares. It will go directly to new factories and machinery. Approximately 70 to 80% of this astronomical amount is earmarked for advanced process technologies. The focus here is on the next big step: 2-nanometer chips. Production of these chips must be scaled up rapidly in 2026. With these investments, TSMC is building a moat around its market position that no other company can overlook.

The European dilemma

What does this show of power mean for Europe? With the Chips Act, the European Union is striving for strategic autonomy. We want to be less dependent on Asia. However, the reality is stubborn. TSMC is indeed expanding outside Taiwan, with planned factories in the United States, Japan, and Dresden, Germany.

But we have to be honest about what we are getting. The most advanced technology, the 2-nanometer and 3-nanometer processes required for AI, will remain firmly anchored in Taiwan for the time being. European factories will focus on older, more mature technologies. These are essential for our automotive industry and industrial machinery, but they play no role in the AI revolution.

So the ‘brains’ of the future will not be made in Germany. With billions in subsidies, Europe is buying security of supply for today's economy, but not leadership in tomorrow's economy. In short, Europe is not (yet) playing in the Premier League of AI hardware.