TSMC targets 30% power savings as AI energy crisis forces chip design rethink

Energy use forcing rethink of AI chip design, TSMC says

AI's massive electricity needs are now driving chip development. Energy efficiency is becoming more critical than raw computing power. TSMC, a leading chipmaker, sees customers prioritizing performance gains that use less power. This shift impacts smartphones to AI data centers. New technologies like advanced packaging and chip stacking are key. TSMC aims for significant power reduction in upcoming chip generations. A senior TSMC executive said on Thursday that surging electricity demands from AI are making energy efficiency rather than computing power the main constraint shaping future computer chip development. Kevin Zhang, Senior Vice President of Business Development, said customers across smartphones to AI data centres are increasingly prioritising performance gains that do not drive up power use, as operators contend with the cost ⁠and availability ⁠of electricity. "The area customers most want improvement in is energy efficiency. This is true across the board, whether you are the edge guy, smartphone, mobile, IoT application, or high-performance AI data center," Zhang told reporters at a conference in Amsterdam. The shift is part of a broader turning point for the semiconductor industry, where simply packing more transistors onto chips is no longer enough to sustain performance gains for energy-hungry AI workloads. TSMC, ⁠the world's largest contract chipmaker, makes AI chips for Nvidia and AMD, as well as custom AI processors for major cloud companies including Google, Amazon, Meta ⁠and Microsoft. Zhang said improvements in transistor density remain central to TSMC's roadmap, but other approaches - such as advanced packaging, chip stacking and photonics - are becoming increasingly important to boost efficiency. He said TSMC expects its chips to cut power consumption by up to 30% between its current N2 technology and its A14 generation, due around 2028, while delivering more than 20% higher computing performance. The comments come as rivals also explore alternative ways to keep improving chip performance. Chinese competitor Huawei unveiled its 'Tau Scaling Law' plan this week to improve performance by speeding up data movement within chips. "The concept has been around in this industry for long enough," Zhang said, ⁠describing it as largely dependent on integrating components more closely, such as through 3D stacking. Huawei's approach reflects constraints facing Chinese firms, which are barred by U.S.-led export controls from accessing extreme ultraviolet (EUV) lithography machines made by Dutch ASML - advanced tools for printing smaller circuits. TSMC, a major buyer of ASML's EUV systems, said in April it would delay adoption for several years of the next generation of the technology, highlighting how design features improving energy efficiency are becoming more urgent than smaller circuitry for its coming generation of AI chips.

Taiwan Semiconductor Targets 30% Power Savings To Fight the AI Energy Crisis: Report - Taiwan Semiconduct

Taiwan Semiconductor Manufacturing Company Ltd (NYSE:TSM) remained in focus Friday as investors weighed AI supply-chain demand, energy-efficiency priorities, and U.S.-China chip policy risks. TSMC Emphasizes Energy Efficiency In AI Chips TSMC Senior Vice President of Business Development Kevin Zhang told Reuters that rising electricity demand from AI is making energy efficiency a central priority for future chip development. Zhang said customers across smartphones, IoT devices, and AI data centers increasingly want stronger performance without sharply higher power consumption, Reuters reported Thursday. He said TSMC still views transistor-density improvements as important, but advanced packaging, chip stacking, and photonics are becoming more critical to improving efficiency. According to Reuters, Zhang said TSMC expects chips to cut power use by up to 30% between its current N2 process and planned A14 generation around 2028, while delivering more than 20% higher computing performance. NVIDIA Commentary Highlights Taiwan Supply-Chain Demand China Policy Remains A Sentiment Driver Traders continued monitoring U.S.-China chip policy after Huang said the U.S. approved licenses allowing NVIDIA to sell H200 chips to Chinese customers, though shipments have not started. Mainland China accounted for 9% of TSMC's fiscal 2025 net revenue and 11% in fiscal 2024, making China demand and policy outcomes important drivers for investor sentiment. Market Backdrop Stays Mildly Supportive U.S. equity futures were modestly firmer, with the S&P 500 and Nasdaq slightly higher while the Russell 2000 edged lower. That backdrop supported large-cap technology names, but TSMC's stock-specific story remained centered on AI demand, energy-efficient chip design, and China-related policy risks. Earnings & Analyst Outlook Looking further out, the next major catalyst for the stock arrives with the July 16, 2026 (estimated) earnings report. * EPS Estimate: $3.69 (Up from $2.47 YoY) * Revenue Estimate: $39.76 Billion (Up from $30.07 Billion YoY) * Valuation: P/E of 36.3x (Indicates premium valuation relative to peers) Analyst Consensus & Recent Actions: The stock carries a Buy rating with an average price target of $420.00. Recent analyst moves include: * Barclays: Overweight (Raises Target to $470.00) (April 22) * DA Davidson: Buy (Maintains Target to $450.00) (April 17) * Needham: Buy (Raises Target to $480.00) (April 16) TSM Price Action: Taiwan Semiconductor shares were up 0.56% at $427.25 during premarket trading on Friday. The stock is trading near its 52-week high of $430.55, according to Benzinga Pro data. Photo by wakamatsu via Shutterstock Market News and Data brought to you by Benzinga APIs To add Benzinga News as your preferred source on Google, click here.