Key points
- TSMC is reportedly weighing a multi-fab campus in Texas
- Musk says TSMC and Terafab are in talks
- A tax credit deadline may decide the Texas plan
Taiwan Semiconductor Manufacturing Co. (TSM) is considering a chipmaking campus in Texas that would expand its US manufacturing footprint beyond Arizona, Bloomberg reported on Oct. 1. Two days later, Elon Musk confirmed talks between TSMC and Terafab, the chip factory SpaceX is building in Texas.
"Just discussions, but something may come of it," Musk wrote on X. TSMC declined to comment on what it called "market rumors." Neither a TSMC campus nor an agreement with Terafab has been announced, and it remains unclear how the two discussions might overlap.
A Texas campus could include up to six fabs
Taiwan's Economic Daily News first reported the possible expansion in late September, identifying the Dallas area as a potential location for as many as six advanced chip factories. Bloomberg said each fab would cost at least $20 billion and that planning remains at an early stage.
One condition is a tax-credit extension, according to a Bloomberg source. The advanced manufacturing investment credit covers 35% of qualified investment, but current rules require qualifying construction to begin before Jan. 1, 2027. The source said the Texas investment depends on Congress extending that deadline. Bloomberg also reported that TSMC has held talks with officials in Singapore.
The expansion discussions come as customers such as Nvidia (NVDA) and AMD seek more capacity for advanced AI chips. North American customers account for more than 75% of TSMC's wafer revenue this year.
TSMC has already committed $265 billion to Arizona
Chairman C.C. Wei added $100 billion to that commitment on TSMC's second-quarter earnings call in July. He said the additional investment would likely fund four more fabs covering wafer production and advanced packaging, with construction timing tied to customer demand. TSMC's first Arizona fab is already in volume production.
Overseas expansion puts pressure on margins
The added capacity comes at a cost. Chief Financial Officer Wendell Huang said in July that overseas factory ramp-ups would reduce TSMC's gross margin by 2 to 3 percentage points initially and 3 to 4 points later, CNBC reported. Morningstar analyst Phelix Lee estimated that TSMC's US-made chips cost 20% to 50% more than chips made in Taiwan.
TSMC reported a 67.7% gross margin in the second quarter, and analysts quoted by CNBC expect customers to cover much of the higher cost.
Musk wants TSMC's help with Terafab
Terafab is a chip factory that SpaceX (SPCX) is building in Grimes County, Texas, to supply Musk's companies. Texas Gov. Greg Abbott announced in August that SpaceX would spend $16.8 billion on the first phase, with $55 billion to $119 billion planned across up to four phases. Intel (INTC) joined the project in April.
Tim Culpan of the newsletter Culpium reported on Oct. 2 that TSMC is exploring ways to help run Terafab's factories. "The most likely scenario is for TSMC to try to own and operate the new factory," he wrote, adding that the plans "are not set in stone." Musk's post confirmed the talks but not any terms.
For TSMC's own Texas campus, the next marker is whether Congress extends the tax credit's construction-start deadline.
