Semiconductor Foundry Industry Revenue to Surpass $165 Billion in 2025

The global pure-play semiconductor foundry industry's revenue is projected to grow 17% YoY in 2025 to exceed $165 billion. The advanced 3nm and 5/4nm nodes are key drivers, with revenue from the 3nm node estimated to rise by over 600% YoY in 2025 to reach around $30 billion. Mature nodes, such as 28nm, are expected to see their combined share drop to 36% in 2025, while revenues are expected to remain largely flat compared to four years ago.

Taiwan Semiconductor Manufacturing Company (TSMC), the global leader in semiconductor manufacturing, has announced a significant expansion in the United States, further cementing its position as a cornerstone of the tech-driven economy. This strategic move, valued at $100 billion, brings TSMC's total U.S. investment to $165 billion, and is set to reshape global supply chains and technological leadership.

The expansion is driven by three key megatrends: geopolitical tailwinds, supply chain diversification, and the explosive demand for artificial intelligence (AI). TSMC's dominance in advanced packaging technologies, particularly CoWoS, and its 60% share of high-performance computing (HPC) revenue position it as an essential player in the next phase of the tech economy.

Geopolitical Tailwinds: A Semiconductor Pivot in the U.S.-China Tech Cold War

The U.S. investment by TSMC is a direct response to the intensifying U.S.-China tech rivalry. Semiconductors, the lifeblood of modern technology, have become a strategic asset in this conflict. The U.S. government has incentivized domestic production through the CHIPS and Science Act, and TSMC's $165 billion commitment, largely backed by $6.6 billion in direct subsidies and $5 billion in low-cost loans, ensures its role as a key enabler of U.S. national security and economic competitiveness. This expansion aligns with Washington's goal of reducing reliance on Chinese manufacturing for critical technologies, offering long-term stability and growth for investors.

Supply Chain Resilience: Diversification as a Strategic Imperative

TSMC's U.S. expansion is a deliberate effort to diversify its footprint, reducing exposure to geopolitical risks in Southeast Asia and ensuring redundancy in production. The Arizona facilities will focus on 2nm and 3nm process nodes and advanced packaging like CoWoS, critical for AI accelerators and high-performance computing. By 2028, TSMC aims to scale CoWoS production to 150,000 wafers per month, a capacity that will support U.S. leadership in AI and data centers. This diversification creates a resilient supply chain that can withstand disruptions from trade wars, natural disasters, or cyberattacks.

AI-Driven Demand: TSMC's 60% HPC Revenue and the CoWoS Advantage

The AI revolution is TSMC's most potent growth engine. In Q1 2025, HPC accounted for 60% of TSMC's wafer revenue, driven by demand for AI chips from hyperscalers, cloud providers, and semiconductor designers like NVIDIA and AMD. TSMC's advanced packaging technologies, particularly CoWoS, are the backbone of this demand. CoWoS enables the integration of multiple chiplets and high-bandwidth memory (HBM) on a single substrate, a critical enabler for AI accelerators. TSMC's CoWoS capacity is projected to reach 65,000–75,000 wafers per month in 2025, with 63% of this demand coming from NVIDIA alone. This near-monopoly on the most advanced packaging technology creates a moat that is difficult to replicate.

Investment Thesis: TSMC as a Cornerstone of the AI Era

For investors, TSMC's U.S. expansion and AI-driven demand present a unique confluence of tailwinds. Its financial strength—evidenced by a 58.6% gross margin and a 38.6% YoY revenue increase in Q1 2025—supports its ability to reinvest in R&D and scale production. The company's $165 billion investment in the U.S. is not just a bet on AI; it's a commitment to maintaining its technological edge against rivals like Samsung and SMIC. TSMC's partnerships with U.S. tech giants like Apple, NVIDIA, and AMD ensure a stable pipeline of orders, while its workforce development initiatives further solidify its long-term competitiveness.

Risks and Considerations

While TSMC's position appears unassailable, risks remain. Execution challenges in scaling U.S. facilities could delay timelines, and geopolitical shifts could alter the subsidy landscape. Additionally, the high capital intensity of semiconductor manufacturing means TSMC must maintain strong cash flow to fund its $38–42 billion 2025 capex budget. However, these risks are mitigated by TSMC's dominant market position, its strategic alignment with U.S. policy, and the secular growth of AI.

Conclusion

TSMC's U.S. expansion is more than a corporate investment—it's a strategic repositioning that aligns with the global shift toward AI, supply chain resilience, and geopolitical security. By leveraging U.S. subsidies, scaling advanced packaging technologies, and securing a dominant role in the AI ecosystem, TSMC is not just future-proofing its business but also reshaping the semiconductor industry. For investors, the company offers a rare combination of growth, stability, and geopolitical tailwinds, making it a must-own in a portfolio focused on the tech-led economy.

References:
[1] https://www.ainvest.com/news/tsmc-strategic-expansion-implications-long-term-growth-geopolitical-resilience-2507/
[2] https://timestech.in/logic-semiconductor-market-to-exceed-usd-231-billion-by-2034/