It looks like Taiwan Semiconductor (NYSE:TSM) is preparing to expand its already sizable presence in the global semiconductor market. The company just revealed its plans to build its second microchip production plant in Arizona. Moreover, President Joe Biden attended an opening ceremony in the city of Phoenix for Taiwan Semiconductor’s new production plant. Nevertheless, TSM stock fell during the early hours of today’s trading session.
Yesterday, William White reported Biden planned to meet with Taiwan Semiconductor’s executives in the company’s Arizona-based production plant. This facility is already valued at $12 billion, but Taiwan Semiconductor plans to ramp up its investment in the facility to a whopping $40 billion.
White also mentioned Taiwan Semiconductor intends to open its second factory in Arizona by 2026. Reuters reported the first microchip fabrication factory should be up and running by 2024.
Furthermore, Taiwan’s second Arizona-based production facility will “make the most advanced chips currently in production,” Reuters reports. These “3 nanometer” microprocessors could be gamechangers in the industry.
What’s Happening With TSM Stock?
One might assume TSM stock would rise today as financial traders absorb the news of Taiwan Semiconductor’s ambitious plans in Arizona. Yet, shares actually lost around 1% of their value in early-morning trading.
Taiwan Semiconductor expects to generate $10 billion in annual revenue from the two Arizona chip-making plants when they’re up and running. Hence, it will take a while for the company to make up for the financial outlays involved in establishing these fabrication factories.
This might explain the market’s ho-hum response to these developments with Taiwan Semiconductor. Still, there will likely be a positive long-term impact for the company, at least in terms of production output. “When completed with both fabs, we will manufacture over 600,000 wafers a year,” Taiwan Semiconductor Chairman Mark Liu clarified. (A wafer is a “shiny disc that chips are made on,” Reuters explained.)
Patience, as always, is the key to success here. The muted price action in TSM stock today isn’t necessarily the end of the story. Taiwan Semiconductor should eventually be able to produce microprocessors faster and generate robust revenue from this. So, sooner or later, the company’s investors might enjoy a substantial windfall.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
