TSMC's Advanced Nodes Nearly Sold Out

TSMC's N2 node represents a significant leap, being its first to incorporate gate-all-around (GAA) nanosheet transistors. This architectural change promises a 10-15% speed improvement at the same power or a 25-30% power reduction at the same speed compared to the 3nm process. Mass production began in the last quarter of 2025 at its Fab 22 in Kaohsiung, Taiwan. Beyond Apple, a roster of high-performance computing (HPC) clients are lined up for N2, including Nvidia, AMD, MediaTek, and Qualcomm. Approximately 15 customers are already working on N2 designs, with about 10 of them focused on HPC applications. This demand is driven by the needs of AI accelerators, data centers, and high-end smartphones. The intense demand for advanced nodes is translating into significant pricing power for TSMC. The company is expected to increase prices for its N2 and N3 wafers by 10-20% starting in 2025, with N2 wafers potentially costing between $25,000 and $30,000. This follows a trend of price hikes for its 3nm nodes due to overwhelming demand from major clients. While TSMC leads, competitors are not standing still. Samsung is also developing its 2nm process, and Japan's Rapidus aims for mass production of 2nm chips by 2027 with government and private sector backing. Intel is also a key player, with plans to use its own 18A process for upcoming processors. The insatiable demand for cutting-edge silicon for AI applications is reshaping customer dynamics. For the first time in a decade, Apple may not be the dominant customer on a new node, with its share of N2 capacity potentially dropping below 50% as HPC players like Nvidia increase their orders. To meet the surging demand, TSMC is significantly boosting its capital expenditures. The company plans to invest between $52 billion and $56 billion in 2026, a substantial increase from the $40.9 billion spent in 2025, to expand its advanced node capacity. Apple's strategy for the M6 processor involves using the initial N2 process rather than waiting for the enhanced N2P variant. This decision is reportedly to prioritize significant architectural upgrades and control costs, having already secured a major portion of the initial N2 supply. The 3nm and 5nm nodes currently form the bedrock of TSMC's revenue, accounting for a combined 58% of sales in the fourth quarter of 2025. The high-performance computing sector has become TSMC's largest revenue source, making up 55% of sales in the same period.