3nm production capacity is in crisis; TSMC's major clients are forced to divert orders. Is this an opportunity for Samsung and Intel?

Under the AI wave, chip demand is surging. As TSMC's capacity is fully booked until 2027, the "six major clients" including Apple and Nvidia are being forced to consider shifting part of their orders to Samsung and Intel.

According to Chase Trading Desk, a recent research report from Deutsche Bank shows that the global semiconductor foundry giant TSMC is experiencing "happy troubles." Because production capacity for the 3nm process is extremely tight and orders are booked through all of 2026 and even into 2027, TSMC has to significantly increase its capital expenditure plans.

This capacity bottleneck is reshaping the market landscape, forcing top clients who previously relied on TSMC to seriously consider Samsung and Intel as alternatives.

Deutsche Bank analysts including Robert Sanders pointed out in the report that TSMC's announced capital expenditure guidance for 2026 reaches as high as $52 to $56 billion, significantly higher than the bank's expected $50 billion and the market consensus of $46 billion.

Analysts believe this is actually TSMC admitting that its capital expenditure plan for 2025 was "too conservative" in the face of soaring AI demand. The current situation is no longer a simple CoWoS packaging capacity spillover, but a serious supply shortage in the core wafer manufacturing capacity—especially the 3nm process.

This supply-demand imbalance is having a direct spillover effect on the market. The report emphasizes that although Samsung and Intel have "chequered records" in foundry history, the "six major clients"—Apple, Nvidia, AMD, Broadcom, Qualcomm, and MediaTek—currently have no choice but to seek alternative capacity. As a result, TSMC's market share in advanced process foundry is expected to drop from 95% to 90%.

Capital Expenditure Surges to $56 Billion, 3nm Capacity "In Extreme Demand"

The most striking figure in TSMC's Q4 financial report is its 2026 capital expenditure guidance. The scale of $52 to $56 billion indicates the company is going all out to tackle the capacity crisis.

Deutsche Bank notes that, given TSMC's entire production capacity for 2026 has likely already been fully reserved and orders backlog now extends into 2027, this surge in spending is not surprising.

Previously, in the face of booming AI demand, the initial bottleneck was mainly in CoWoS packaging, which caused some orders to spill over to companies such as ASE and Amkor. However, the current situation is even more severe: demand far outpaces supply, especially for the 3nm process.

Report data shows that although TSMC plans to raise 3nm capacity to 190,000 wafers per month (190k wpm) by the end of 2026, it still cannot meet customer appetites.

Deutsche Bank mentioned in the report: "Clients wanting more capacity has always been the norm under TSMC's high utilization rate, but reaching this degree is unprecedented."

Six Major Clients Forced to "Divert," Samsung's Taylor Plant Could Be First Choice

The extreme capacity shortage is forcing TSMC to adopt more aggressive strategies. It is reported that TSMC is delaying the rollout of new 3nm development projects, guiding clients to shift more of their 2027/28 mass production products toward the 2nm GAA process. TSMC is also using pricing strategies to "encourage" clients to make this switch, which can be seen in its strong Q1 2026 guidance.

This suboptimal situation is forcing the world's six largest chip design companies—Apple, Nvidia, AMD, Broadcom, Qualcomm, and MediaTek—to look to competitors.

Deutsche Bank believes that in this capacity scramble, Samsung's plant in Taylor (SF2P) may be favored over Intel.

The report notes, "For clients seeking alternative supply, Samsung's Taylor plant is more likely to be the first port of call."

Specifically, Qualcomm and AMD are most likely to consider Samsung; while previous discussions report that Apple and Broadcom are considering Intel. However, analysts add that although Intel has the story potential of the 14A process, "there is still a lot of work to be done."

AI Drives Upgrade in Long-Term Growth Outlook, Gross Margin Target Raised to 56%

Despite short-term challenges in capacity allocation, the long-term dividend from AI-driven growth is highly certain. TSMC confirms that AI-related growth is expected to accelerate, with the projected compound annual growth rate (CAGR) for 2024 to 2029 being raised from the previous mid-40% to the mid-to-high-50% range.

Driven by this, TSMC lifted the company's overall long-term growth forecast to 25% CAGR, and its long-term gross margin target to 56%. Deutsche Bank believes that, considering the latest AI trends and TSMC's pricing moves, these upward revisions "are not surprising."

Regarding overseas capacity expansion, the report mentions TSMC's Arizona plant is currently in a low output phase (Phase I 4nm, monthly capacity 20,000 wafers), and is expected to generate its first 3nm revenue by the end of this year with Phase II. Although overseas plant building will dilute gross margin by 2-4% and faces challenges such as talent, infrastructure, and yield, the market focus remains on its core profitability.

Based on enhanced profitability from higher wafer pricing, Deutsche Bank has raised TSMC's (2330.TW) target price by 10% to NT$2,200. This target price corresponds to 20 times the expected earnings per share (EPS) for 2027, in line with sector peers.

Analyst Robert Sanders said that this valuation reflects TSMC's robust position and strong growth rate up to 2028. However, the report also noted potential risks, including geopolitical risks and Intel's attempt to bring production back in-house. Additionally, if AI-related spending suddenly slows or the expansion of CoWoS capacity is poorly executed, that would also pose risks.

~~~~~~~~~~~~~~~~~~~~~~~~

The above content is from Chase Trading Desk.

For more detailed analysis, including real-time commentary and frontline research, please join [Chase Trading Desk Annual Membership]

Risk Warning and DisclaimerThe market is risky; investment must be cautious. This article does not constitute personal investment advice, nor does it consider the special investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular situation. Any investments made based on this article are at your own risk.