TSMC’s $56 billion capex plan, forged in the wake of U.S.-Taiwan tariff talks, signals a reshaping of the Korea-Japan-Taiwan manufacturing race

TSMC sets 2026 capex at $52 billion to $56 billion
Plans to ramp up U.S. manufacturing investment after U.S.-Taiwan tariff deal
Unified Korea-Japan-Taiwan tariff rates usher in a new era of productivity competition

TSMC, the world’s largest foundry, said it plans to significantly increase capital spending in 2026. With the AI boom expected to persist for some time, the move comes after U.S.-Taiwan tariff negotiations concluded with a large investment package. As Taiwan’s tariff rate has now been aligned with those applied to South Korea and Japan, some in the market say the competitive landscape among the three manufacturing powerhouses could increasingly be reshaped not by pricing, but by productivity.

TSMC unveils aggressive investment plan

According to Bloomberg on the 15th (local time), TSMC said it has set its 2026 capital expenditures at $52 billion to $56 billion. That is at least 25% higher than in 2025 and well above market expectations. TSMC plans to allocate 70% to 80% of the total to leading-edge nodes such as 3nm (N3) and 2nm (N2). Addressing market concerns over the sharp increase in spending, TSMC Chairman C.C. Wei said he reviewed customers’ financial statements to see whether they were actually making money from AI, adding: “They’re really rich.”

Wei’s comments reflect confidence that the AI-driven boom will persist over the medium to long term. TSMC forecast revenue growth of around 30% in 2026. As Nvidia’s key manufacturing partner and a core supplier to major AI accelerator demand, TSMC has maintained strong performance since the AI wave gained momentum. Its net profit in the fourth quarter of last year came in at NT$505.7 billion (about $16.0 billion), beating market expectations, while quarterly revenue reached $33.73 billion. The company also expects full-year 2025 revenue to surpass $100 billion for the first time.

TSMC’s confident stance is expected to continue for some time, as the market remains firmly supplier-led—meaning customers often have to accept a weaker negotiating position to secure capacity. Recent reports around Nvidia’s overtures to TSMC underscore that dynamic. Analyst Ming-Chi Kuo of TF International Securities said on the 15th on X (formerly Twitter) that Nvidia CEO Jensen Huang appears to be looking beyond simply securing production lines and is instead trying to reserve the land for new fabs. Kuo said Huang conveyed to TSMC that he was willing to pay the costs needed to secure the P10 and P11 sites near Fab 18 in Tainan in November last year. Whereas foundry customers typically negotiate over allocated capacity, Nvidia is signaling a desire to lock up fab sites outright to block rivals from entering.

Taiwan’s U.S. investment package, with TSMC at its core

TSMC’s aggressive capital spending is likely to be concentrated in the United States. That is because Taiwan agreed to provide an enormous $500 billion investment package to the U.S. as part of its tariff negotiations with Washington. In an interview with CNBC, U.S. Commerce Secretary Howard Lutnick said the package consists of $250 billion in direct investment by Taiwanese semiconductor and technology companies, along with $250 billion in credit guarantees provided by the Taiwanese government to help small and mid-sized firms expand into the U.S.

Using this funding, Taiwanese companies are set to build out production and innovation capabilities in key industries such as advanced semiconductors, energy, and AI across the United States. The Taiwanese government will also operate separate guarantee programs to support the creation of a fully integrated semiconductor ecosystem in the U.S. At the center of this agreement stands TSMC. Already building or having completed six semiconductor fabs in Arizona, TSMC is reportedly planning to add five more plants under the new trade deal. Lutnick said TSMC has purchased millions of acres of land adjacent to its Arizona sites, emphasizing that U.S.-based production capacity will double.

In step with Taiwan’s large-scale investment commitments, the U.S. agreed to lower reciprocal tariffs between the two sides from 20% to 15% and to offer generous incentives to Taiwanese chipmakers. Taiwanese companies building semiconductor fabs in the U.S. will be exempt from product-specific tariffs on volumes of up to 2.5 times their production capacity during the construction period. Even after completion, they will be able to export to the U.S. tariff-free volumes equivalent to 1.5 times a plant’s capacity. In practical terms, if a Taiwanese firm builds a fab capable of producing 1 million wafers in the U.S., it will be allowed to import and sell 2.5 million wafers made in Taiwan during the construction phase without paying tariffs.

Competition among South Korea, Japan, and Taiwan

Taiwan’s decision to pursue a hard-line strategy of massive investment in the United States during tariff negotiations is widely seen as an effort to narrow the tariff gap with South Korea and Japan, which it views as key competitors. South Korea last July cut its reciprocal tariff rate to 15% in exchange for committing $350 billion in investment in the U.S. Japan likewise secured a reduction from 25% to 15% by pledging $550 billion in U.S. investment and agreeing to open its markets in areas such as autos, rice, and agricultural products. Taiwan, by contrast, was assigned a 20% tariff rate in August last year, a decision Washington made unilaterally while bilateral negotiations were still ongoing.

Although the rate was lower than the 32% floated in April, the outcome was widely seen in Taiwan as falling short of expectations, largely because it remained higher than those applied to South Korea and Japan. All three economies compete fiercely in manufacturing, with semiconductors and electronics forming the backbone of their export structures. In Taiwan’s case, about 60% of exports to the U.S. are concentrated in information technology sectors including semiconductors. Any tariff gap with Japan and South Korea would therefore risk significantly eroding the competitiveness of Taiwanese exporters led by TSMC.

With the latest deal aligning tariff rates across all three countries, some analysts say competition is now likely to shift away from pricing and toward productivity. In that context, South Korea is often seen as being at a disadvantage due to structural issues that weigh on productivity. One persistent burden is high labor costs. According to a report by the Korea Employers Federation comparing wages in South Korea, Japan, and Taiwan, Korea’s wage levels—adjusted using purchasing power parity—are about 20% higher than those of Japan and Taiwan. Annual total pay for regular manufacturing workers in Korea stands at $67,491, which is 27.8% higher than Japan and 25.9% higher than Taiwan.

The problem is that Korea’s productivity does not match its wage levels. OECD data show Korea’s hourly labor productivity was $57.5 in 2024, placing it in the bottom third of member countries for the seventh consecutive year. Ha Sang-woo, head of economic research at the Korea Employers Federation, said a high-wage structure not supported by productivity is unsustainable, calling for urgent efforts to boost productivity and shift toward job- and performance-based pay systems. He added that policies such as legally extending the retirement age should be approached cautiously, warning they could deepen labor-market dualization and worsen youth employment at a time when companies are already under heavy labor-cost pressure.