C.C. Wei, chief executive and chairman of TSMC, confirmed on Thursday that the company is considering expansion of its American production capacity beyond Arizona and Texas is one of the options it is evaluating. The head of the world's largest contract chipmaker also confirmed negotiations with Elon Musk regarding usage of Terafab, but stressed that to be a part of it, the fab must be managed by TSMC, which automatically excludes burgers and cigars in the cleanroom.
"We expanded our capacity consideration to see outside Arizona, whether we can get another chance to expand our capacity," said C.C. Wei during the company's earnings call with financial analysts and investors. "Texas is one [of our options]. We sent the teams to Texas to do all the evaluation. We also talked to one of our customers, who is trying to build a fab, Terafab, let me be more specific."
Recently in transpired that Elon Musk's Terafab was in talks with TSMC over using the giant semiconductor production facility together. Elon Musk confirmed the negotiations, whereas TSMC did not comment.
"We are discussing with them to see whether we can be utilizing that actual capacity also," Wei added. "So, we are still in discussion. If we have any solid conclusion, we will share with you."
The information about negotiations between Elon Musk's Terafab and TSMC immediately triggered chatter that the parties are set to adopt TSMC's typical business model it uses for ESMC and JASM facilities under which it operates fabs co-owned with other investors. However, Musk then said that Terafab's facility would be operated by Terafab and TSMC could only sub-lease part of its cleanroom. Now, C.C. Wei said that if TSMC joins the project, it will insist on operating the fab.
"We are still in discussion," Wei replied when asked whether TSMC is not becoming a part of the Terafab project. "Let me say that. […] Either way, it will be possible, but the fab has to be run by TSMC."
The key question now is whether Musk and TSMC can agree on an arrangement that satisfies both parties. Musk wants Terafab to retain control of its manufacturing complex, whereas TSMC insists on operating any fab it uses. One potential compromise would be for Terafab to own the facility and lease a portion of it to TSMC, which would independently operate its production lines. Such an arrangement would allow Musk to retain ownership of the whole complex while giving TSMC control over select manufacturing lines. However, if Terafab itself uses Intel's 14A process technology at the facility, TSMC's presence there will be extremely complicated, if possible at all. In any case, so far the parties have not come to any agreement.
TSMC on Thursday reported revenue of $46.72 billion for the third quarter of 2026, up 41.2% year-over-year and 16.2% sequentially. The foundry's net income reached approximately $23.9 billion, an increase of 68.7% from the same quarter a year earlier, driven by elevated demand for chips used by AI infrastructure. The company's gross margin was 66.4%, which is below gross margins reported by DRAM makers, but still a historic record.
For the fourth quarter of 2026, TSMC expects revenue between $52.3 billion and $54.3 billion, which represents approximately 14% sequential growth at the midpoint. The company projects gross margin between 65% and 67%, up both sequentially and YoY.