TSMC's Southern Expansion: Shalun Emerges as Focal Point in Taiwan's Semiconductor Race

As of last week, TSMC (TSM) stock rose by 0.56%, marking a two-day rally with a 3.45% increase over the past two days. However, it faced a 5.66% decline over the past week and a 5.99% rise year-to-date, bringing its market capitalization to NT$10.85685 trillion.

Recent reports suggest that TSMC's most advanced 1nm process facility is speculated to be sited in Tainan's Shalun, planning to build a mega-fab potent enough to house six 12-inch plants. This strategic move aims to enhance the existing advanced process manufacturing ecosystem in Southern Taiwan, aligning with national scientific hub initiatives expanding through Kaohsiung and Pingtung, indicating a core investment in the Great Southern Silicon Valley Push.

In response to these siting rumors, TSMC has acknowledged the complexity in choosing a factory location, emphasizing Taiwan as its primary base while not ruling out other possibilities. TSMC has been seminal in establishing new 2nm facilities in Hsinchu Baoshan and Kaohsiung Nanzi, with insiders hinting the Shalun plant being labeled internally as 'Fab 25'. This move underscores TSMC's commitment to Taiwan, resonating through its overseas ventures in the U.S., Japan, and Germany.

TSMC's unwavering focus on domestic expansion is poised to pivot towards southern regions, as confirmed by Chairman Mark Liu in a recent briefing. The upcoming board meeting slotted for mid-month in Arizona will likely greenlight additional investments in areas like Pingtung.

The company's withdrawal from constructing the 1nm facility in the Taoyuan Longtan area has prompted regional governments, including Chiayi, Tainan, Kaohsiung, and Pingtung, to vie for hosting the new plant. Notably, Kaohsiung city has been vigorously promoting the "Semiconductor S Corridor," extending its tech zones southward to encompass various industrial and scientific parks, foreseen to attract further supply chain investments.

TSMC's submission to the Southern Taiwan Science Park Administration for 1nm and 1.4nm land requirements in Shalun reveals an initial strategy to dedicate P1 through P3 factories for 1.4nm production, with P4 to P6 reserved for 1nm. Should the Central Taiwan Science Park facilitate land provision, priorities could shift, realigning Shalun to first tackle 1nm manufacturing.

The local government has recognized the necessity for responsive planning by initiating assessments for an AI ecological science park in Shalun, aligning with broader administrative mandates for facilitating scientific expansions, signaling steady progress upon public consultation feedback.