TSM's Nanosheet Roadmap Advances: Can it Maintain Tech Leadership?
The N2 logic node is Taiwan Semiconductor's first generation of nanosheet transistor technology, offering 10-15% speed improvement at the same power, or 25-30% power reduction at the same speed, plus more than 15% chip density gain over N3E. Volume production is on track for the second half of 2025, with a ramp profile similar to N3. Moreover, Taiwan Semiconductor also expects the number of new tape-outs for N2, fueled by both smartphone and HPC applications, to be higher than both 3-nanometer and 5-nanometer in their first two years.
N2P, which is an extension of Taiwan Semiconductor's N2 family, aims to deliver further performance and power benefits, and its volume production is set for the second half of 2026. A16, which is also nanosheet-based, introduces TSM's Super Power Rail technology. Compared with N2P, A16 is expected to provide 8-10% speed improvement at the same power, or 15-20% power improvement at the same speed, plus 7-10% additional chip density gain. Volume production is also targeted for the second half of 2026.
Looking ahead, Taiwan Semiconductor's A14 node will feature its second-generation nanosheet transistor structure, offering a full node stride from N2. Compared with N2, A14 is expected to provide 10-15% speed improvement at the same power, or about 25-30% power improvement at the same speed, plus roughly 20% chip density gain and its volume production is scheduled for 2028. Taiwan Semiconductor also plans a Super Power Rail version of A14 for 2029. Additionally, the management believes A14 and its derivatives will further extend its technology leadership into the next decade.
With fabs under construction in Taiwan and Arizona to support both N2 and A16, including fabs in Hsinchu and Kaohsiung Science Parks, and its new Arizona cluster, where about 30% of N2-and-beyond capacity will be located after completion, Taiwan Semiconductor appears well-positioned to benefit from the next wave of AI and HPC demand.
How Competitors Fare Against TSM
Two key competitors, Intel INTC and GlobalFoundries GFS, are working hard to catch up with TSM's lead.
Intel is investing heavily in its foundry business, aiming to produce advanced chips. The company is currently focusing on its 18A process, which signifies 1.8nm chips. Intel's 18A process is claimed to have higher performance and efficiency, which will help the company better compete with Taiwan Semiconductor's upcoming N2 chips.
Meanwhile, GlobalFoundries is not focused on 2nm chips. Instead, it is investing in specialized chips for cars, wireless devices, and the IoTs. While GlobalFoundries does not directly compete with Taiwan Semiconductor at the most advanced nodes, it still aims to take market share in fast-growing chip segments.
TSM's Share Price Performance, Valuation and Estimates
Shares of Taiwan Semiconductor have risen around 23.4% year to date compared with the Zacks Computer and Technology sector's growth of 13%.
TSM YTD Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, TSM trades at a forward price-to-earnings ratio of 23.15, lower than the sector's average of 28.
TSM Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Taiwan Semiconductor's 2025 and 2026 earnings implies a year-over-year increase of 37.5% and 13.1%, respectively. Estimates for 2025 and 2026 have been revised upward in the past 30 days.
Taiwan Semiconductor currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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