TSMC Postpones ASML's Advanced Chipmaking Equipment Over Cost Concerns
Taiwan Semiconductor Manufacturing Co. (TSMC) has announced it will delay the deployment of ASML Holding NV's most advanced lithography machines for chip production until at least 2029. This strategic decision is driven by the need to manage escalating costs in modern semiconductor manufacturing while maintaining profitability.
High-NA EUV Machines Deemed Too Expensive for Production
TSMC deputy co-chief operating officer Kevin Zhang revealed that the company has no current plans to adopt ASML's latest high numerical aperture extreme ultraviolet lithography machines, known as high-NA EUV. These cutting-edge systems carry a price tag exceeding €350 million (approximately US$410 million) per unit.
"We continue to be able to harvest the benefit from current EUV," Zhang stated during a press briefing. "The next-generation high-NA EUV machines are very, very expensive."
While TSMC has acquired a minimal number of these advanced machines, they are being used exclusively for research purposes rather than mass production. The company is actively exploring alternative methods to enhance chip performance without relying on the costly high-NA EUV equipment.
Impact on ASML and Semiconductor Industry
TSMC's decision represents a potential setback for ASML, which anticipates its high-NA EUV machines entering high-volume production between 2027 and 2028. The Dutch equipment manufacturer has set ambitious revenue targets of up to €60 billion by 2030, with investor confidence closely tied to adoption rates of this new technology.
Following the announcement, ASML's U.S.-traded shares experienced a decline of up to 5.5% during intraday trading. This drop occurred despite the stock having gained 36% earlier in the year through Tuesday.
As the world's largest semiconductor manufacturer and ASML's primary customer, TSMC's technology choices significantly influence the entire chipmaking industry. The company maintains the largest equipment budget and serves as a trendsetter in manufacturing techniques frequently emulated by competitors.
Rising Costs in Semiconductor Manufacturing
The semiconductor industry faces increasingly prohibitive expenses, with state-of-the-art chip plants now requiring investments between US$20 billion and US$30 billion to construct. Even ASML's entry-level EUV lithography machines, essential for producing advanced AI chips, cost more than US$200 million each.
Despite these financial challenges, TSMC has revised its long-term gross margin projections upward to 56% or higher, betting that substantial capital expenditures will yield satisfactory returns for investors. The company plans record capital spending that could approach $56 billion in 2026, partly to support its ongoing international expansion.
TSMC's Production Timeline and Global Operations
Zhang confirmed that TSMC's leading-edge A13 chip will enter production in 2029, aligning with the delayed adoption timeline for high-NA EUV equipment. The company remains the primary manufacturer of AI chips for major technology firms including Nvidia Corp., Advanced Micro Devices Inc., and Broadcom Inc.
Regarding international operations, progress at TSMC's first advanced chipmaking facility in the United States is proceeding successfully. The initial fabrication plant in Arizona is achieving chip yields comparable to those at Taiwanese facilities, with a second factory in the state scheduled to begin production next year.
This cautious approach to adopting expensive new technology reflects TSMC's commitment to balancing innovation with financial prudence in an industry where manufacturing costs continue to escalate dramatically.
