Two speakers seated on chairs on a stage in front of a large screen with a rainbow Pride@tsmc graphic — TSMC employees speak during a Pride@tsmc event in this undated photo. The chipmaker is evaluating a possible expansion in Texas as it looks to add more manufacturing capacity.

Taiwan Semiconductor Manufacturing Co. has sent teams to Texas to evaluate a possible manufacturing expansion as demand for advanced chips pushes the company to look beyond its Arizona operations.

Chairman and CEO C.C. Wei confirmed the evaluation during TSMC’s Oct. 15 earnings conference. He also disclosed discussions about a potential role in Terafab, Elon Musk’s proposed chip manufacturing project.

The discussions remain preliminary. Wei said the company would provide more information once it reached a firm conclusion.

The Company Behind Other Companies’ Chips

TSMC manufactures chips designed by other businesses. Its customers include companies such as Nvidia, Apple, AMD and Qualcomm, whose products power artificial intelligence systems, phones, computers and other electronics.

Founded in Taiwan in 1987, TSMC helped establish the business model in which technology companies design their own chips and hire a specialized manufacturer to produce them. Its factories serve markets ranging from high-performance computing and smartphones to vehicles and connected devices.

That position makes TSMC an important part of the AI expansion: companies developing powerful processors also need factories capable of manufacturing those designs in large quantities.

A Condition for Any Terafab Agreement

Wei said major U.S. customers were asking TSMC to increase American production capacity. Texas is among the locations the company is evaluating outside Arizona.

He confirmed talks about whether TSMC could use manufacturing capacity at Terafab, while setting a condition for any arrangement.

“The fab got to be run by TSMC,” Wei said, using the industry’s shorthand for a semiconductor fabrication plant.

His comments left room for different ownership arrangements while insisting that TSMC control manufacturing operations.

That could become a negotiating point. The Associated Press reported that Musk had described his companies as building and operating Terafab, with TSMC potentially leasing part of the facility. No final agreement has been announced.

Strong Demand Drives the Search

TSMC reported third-quarter revenue of $46.72 billion, up 41.2% from a year earlier in U.S. dollar terms. The company attributed its performance to strong demand for its most advanced manufacturing technologies.

During the earnings call, Wei said customer demand continued to exceed the company’s ability to supply chips, prompting efforts to increase capacity.

TSMC already manufactures advanced chips in Phoenix, where its first Arizona factory entered volume production in late 2024. The company also operates a design service center in Austin, giving it an existing Texas presence.

The potential Texas expansion comes as other parts of the semiconductor industry grow across the Sun Belt. In Arizona, Amkor’s planned Peoria packaging and testing campus has expanded to a $12 billion investment, adding capacity for the stages that follow chip fabrication.

For the Texas evaluation, Wei did not identify a selected site, investment amount, construction schedule or job target during the Oct. 15 call.