Semiconductor giant Taiwan Semiconductor (TSM), or TSMC, is set to expand its footprint in Europe. According to Taiwan’s National Science and Technology Council Minister, Wu Cheng-wen, the company plans to open new chip manufacturing plants in the country. The news comes a month after the company revealed its plans to build its first chip plant in Europe to meet the growing demand for artificial intelligence (AI) chips.
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Importantly, the company has already begun construction of its first fabrication plant in Dresden, Germany. The company is investing €10 billion in the plant.
What’s Driving TSMC’s European Expansion?
It’s important to note that this expansion is partly driven by geopolitical factors. By strengthening its presence in Europe, TSMC seeks to reduce risks from escalating tensions between the U.S. and China, as well as between Taiwan and China. This move helps diversify operations and decrease reliance on any single region, creating a more resilient supply chain.
Additionally, the growing demand for AI chips, particularly from U.S. tech giants NVIDIA (NVDA) and AMD (AMD), is a key driver of this expansion. These companies depend on TSMC’s advanced manufacturing capabilities to produce the powerful chips that power AI applications, further cementing TSMC’s industry leadership.
TSM Will Report Q3 Results on October 17
The company’s European expansion plans come ahead of its Q3 earnings report, scheduled for release on October 17. According to Reuters, the company is expected to report a 40% jump in Q3 profit to NT$298.2 billion.
Importantly, TSMC recently disclosed revenue of NT$251.87 billion in September, marking 39% year-over-year growth. This strong performance was driven by high demand for chips.
Is TSM a Buy, Sell, or Hold?
Turning to Wall Street, TSM has a Strong Buy consensus rating based on five Buys assigned in the last three months. At $205, the average TSMC price target implies 7.44% upside potential. Shares of the company have gained more than 85% year-to-date.
