TSMC $TSM Expands Global Chip Plants: $100B Arizona Investment by 2027 Boosts ASML $ASML

The semiconductor industry stands at a critical juncture in 2025, with Taiwan Semiconductor Manufacturing Company (TSMC) driving an unprecedented wave of investment in new fabrication plants (fabs) across multiple continents. This expansion, aimed at meeting soaring demand for advanced chips, particularly for artificial intelligence and high-performance computing, is poised to reshape supply chains and bolster key equipment providers like ASML. TSMC’s aggressive capital expenditure, including a significant focus on the United States, Japan, and Europe, underscores a broader trend of geographic diversification in chip manufacturing, spurred by geopolitical pressures and market needs.

TSMC’s Investment Surge: A Closer Look

TSMC has committed to a staggering investment plan in 2025, with reports indicating a total capital expenditure of approximately $42 billion for the year, a figure aimed at constructing or ramping up nine new production facilities worldwide. This marks the highest number of simultaneous fab projects in the company’s history. In the United States alone, TSMC’s investment in Arizona has escalated to $40 billion, with plans for three fabs, the third of which is expected to commence production of cutting-edge 2-nanometer chips by 2027. This follows an initial commitment of $12 billion in 2020, scaled up to $40 billion by late 2022, representing one of the largest foreign direct investments in U.S. history.

Beyond Arizona, TSMC is also expanding in Japan and Europe. In Japan, the company is constructing facilities to cater to regional demand, while in Europe, partnerships are being forged to establish a foothold in the continent’s burgeoning semiconductor ecosystem. These moves align with a broader industry trend of reducing reliance on concentrated manufacturing hubs in Taiwan, driven by both supply chain resilience concerns and government incentives in host countries.

Impact on Equipment Suppliers: ASML in Focus

The scale of TSMC’s expansion inevitably translates into heightened demand for semiconductor manufacturing equipment, particularly lithography machines, which are essential for producing advanced nodes. ASML, the sole supplier of extreme ultraviolet (EUV) lithography systems, stands to benefit significantly. Recent reports confirm that TSMC is set to receive its first high numerical aperture (High NA) EUV machine from ASML in Q4 2025 (October to December), with each unit costing approximately $370 million. These machines are critical for scaling down to 2-nanometer processes and beyond, ensuring TSMC remains at the forefront of chip technology.

ASML’s monopoly in EUV lithography positions it as a linchpin in the industry. With TSMC, Samsung, and Intel all expanding their fab capacities in 2025, the demand for both EUV and older deep ultraviolet (DUV) systems is expected to remain robust. Notably, service and maintenance of existing machines also form a substantial revenue stream for ASML, with 95% of its sold systems over the past three decades still operational as of mid-2025. This durability ensures a steady flow of post-sales income, cushioning the company against cyclical downturns in new equipment orders.

Market Dynamics and Competitive Landscape

The semiconductor equipment market is not without its complexities. While ASML’s position appears unassailable, investor sentiment, as reflected in some online discussions on platforms like X under accounts such as @thexcapitalist, occasionally questions the stock’s valuation amidst short-term price dips. However, the long-term outlook remains compelling. ASML’s revenue compound annual growth rate since 2019 stands at 17%, underpinned by its unique role in enabling next-generation chip production.

To contextualise the scale of demand, consider the following breakdown of TSMC’s fab investments and their potential impact on equipment spending:

These figures, while substantial, must be viewed against the backdrop of global chip demand, projected to grow at a compound annual rate of 8% through 2030, driven by AI, automotive, and 5G applications. TSMC’s Arizona facilities, for instance, are already reporting yields 4% higher than comparable plants in Taiwan as of Q4 2024 (October to December), a testament to the company’s operational excellence and a signal of future profitability.

Risks and Considerations

Despite the bullish outlook, risks loom on the horizon. Geopolitical tensions, particularly around Taiwan, could disrupt supply chains or force further diversification at significant cost. Additionally, the high capital intensity of fab construction—coupled with potential delays, as seen in Arizona’s initial phases—could strain TSMC’s balance sheet if demand forecasts falter. For ASML, export restrictions on advanced equipment to certain markets remain a wildcard, potentially capping growth in specific regions.

Nevertheless, the trajectory for both TSMC and ASML appears upward in 2025. The semiconductor industry’s structural growth drivers are intact, and the push for localised production only amplifies the need for cutting-edge equipment. If anything, the current expansion cycle might be remembered as the moment when the industry truly globalised, with TSMC and its suppliers reaping the rewards of foresight and scale. A touch of irony lies in the fact that while chips power the future, their production remains tethered to very real, and very expensive, machinery.

References

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Data Center Dynamics. (2025, July 14). TSMC to receive first High NA EUV lithography machine from ASML in Q4. Retrieved August 2, 2025, from https://www.datacenterdynamics.com/en/news/tsmc-to-receive-first-high-na-euv-lithography-machine-from-asml-in-q4/

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Tom’s Hardware. (2025, May 16). TSMC to Spend $42 Billion on Expansion in 2025, Ambitious Plans Detail Nine Production Facilities. Retrieved August 2, 2025, from https://www.tomshardware.com/tech-industry/semiconductors/tsmc-to-spend-usd42-billion-on-expansion-in-2025-ambitious-plans-detail-nine-production-facilities

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Wccftech. (2025, July 13). TSMC’s Arizona Factory For Latest 2nm Tech Could Start Production In 2027, Implies Report. Retrieved August 2, 2025, from https://wccftech.com/tsmcs-arizona-factory-for-latest-2nm-tech-could-start-production-in-2027-implies-report/

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