Demand for TSMC’s 3nm and 5nm Chips Surges Amid AI Advancements

Strong demand for 3nm and 5nm chips from Taiwan Semiconductor Manufacturing Company (TSMC) is forecasted to reach full capacity in 2026, driven largely by the growing integration of artificial intelligence (AI) across various technologies. Despite the anticipated introduction of 2nm chips next year, TSMC will continue to produce significant quantities of its existing nodes to meet the needs of major tech companies.

Reports suggest that TSMC’s production lines for both 3nm and 5nm nodes are expected to operate at 100% capacity in the first half of 2026. Industry sources indicate that leading firms, including Apple, Qualcomm, NVIDIA, and AMD, have secured substantial production allocations, resulting in a backlog of orders extending into next year. To address the heightened demand, TSMC has tripled its 3nm production capacity compared to the previous year, although this may still fall short of fulfilling market needs.

AI Drives Demand for High-Performance Chips

The surge in demand for these advanced chips is primarily fueled by the requirements of AI servers, high-performance computing (HPC) applications, and the integration of AI technology in consumer devices. For instance, Apple’s forthcoming M5 processors and Qualcomm’s Snapdragon X2 Elite chips are set to utilize TSMC’s 3nm process. Additionally, NVIDIA’s next-generation Rubin GPU family and AMD’s Instinct MI355X AI accelerator are also in line for production on the 3nm node.

While these developments present a positive outlook for TSMC’s business, they may not bode well for consumers. There are indications that TSMC might increase its prices, with estimates suggesting a rise of 5-10% for both 3nm and 5nm chips, and potential increases of 15-20% for advanced packaging solutions like CoWoS. Given TSMC’s dominant position in the semiconductor market, customers may have little choice but to accept these price hikes.

The Future of 2nm Technology

Looking ahead, the 2nm chip technology is expected to become the focus of TSMC’s production efforts in 2026. While this represents a significant advancement in chip manufacturing, the associated costs may be prohibitive for many companies. Reports indicate that Apple plans to leverage the 2nm process for its upcoming A20 chips, which are intended for the iPhone 18 series. Initial assessments suggest that these 2nm chips could provide enhanced performance and energy efficiency; however, they may also be priced at 50% higher than their 3nm counterparts.

Despite the anticipated arrival of 2nm technology, the 3nm and 5nm nodes are expected to remain integral to chip manufacturing for the foreseeable future. Not every device will necessitate the advanced capabilities of 2nm chips, and the cost differential will likely ensure that 3nm and 5nm options remain viable for a broad range of products.

In conclusion, TSMC is poised for a busy year ahead as it grapples with soaring demand in an increasingly AI-driven market. The company’s ability to balance production capacity and pricing will be critical as it navigates the evolving landscape of semiconductor technology.