TSMC Plans Kumamoto 3nm Expansion as AI Demand Drives Deeper Sony Partnership

Kumamoto expansion connects advanced chips with AI vision

TSMC is pressing ahead with plans to manufacture 3 nanometer chips at its second Kumamoto factory, extending a Japanese expansion that now combines advanced computing with a separate Sony partnership to make image sensors. The revised factory plan calls for initial capacity of 6,000 wafers a month and first shipments in the fourth quarter of 2028.

Hsiao-ching Chang, TSMC's senior vice president and deputy co-chief operating officer, outlined the company's ambitions at the Nikkei Global Management Forum in Tokyo on November 11, 2026. He said the first Kumamoto factory was fully operational and that TSMC would continue expanding the site as artificial intelligence increased demand for advanced semiconductors.

Japan's Ministry of Economy, Trade and Industry approved the revised production plans on October 16. Chang's remarks connect that approved manufacturing project with a wider commercial push: customers moving toward more advanced chips, growing demand for computing power, and machines that need image sensors to understand their surroundings.

Sony and TSMC have also signed a binding agreement for a new image sensor venture in Koshi, Kumamoto Prefecture. Its announced production target is 2029, initially serving smartphones. Chang linked closer cooperation with Sony to Physical AI, the use of artificial intelligence in machines that perceive and act in the physical world.

The projects give Kumamoto two connected industrial opportunities. One is manufacturing the logic chips that process information. The other is making sensors that capture visual information for electronic devices. Their schedules, ownership and investment arrangements are separate, while both depend on Japan's suppliers, public support and local infrastructure.

What changed at the second factory?

TSMC's second Kumamoto factory has moved a long way from the project announced in February 2024. The company's JASM expansion announcement initially envisaged operations beginning by the end of 2027, with construction planned to start by the end of 2024.

That announcement put combined investment in the two factories at more than US$20 billion. Together, they were expected to produce more than 100,000 wafers a month using technologies ranging from 40 nanometers to 6 and 7 nanometers, serving automotive, industrial, consumer and demanding computing applications.

The revised second factory plan instead concentrates on 3 nanometer logic chips. Its first shipments are expected between October and December 2028, mainly for Japanese customers, with production planned to continue for more than 10 years. The timetable moves the opening production milestone about a year beyond the original target.

TSMC first disclosed the Kumamoto technology upgrade in February 2026. The subsequent October production approval set the opening capacity at 6,000 wafers a month, compared with 48,000 under the earlier approved plan for the main production processes. That is one eighth of the previous figure, combining a more advanced technology with a smaller initial manufacturing commitment.

What 3 nanometer production means

A manufacturing label such as 3 nanometers names a generation of chip production technology. It gives customers a way to distinguish manufacturing capabilities; modern process names are not literal measurements of every feature inside a chip.

More advanced processes can fit greater computing capability into a given area and improve the balance between performance and electricity consumption. Those qualities matter for AI systems that perform large numbers of calculations, as well as devices that must operate within limited power budgets.

A wafer is a thin, round slice of semiconductor material on which many chips are made together. Kumamoto's capacity figures use wafers measuring about 300 millimeters, or 12 inches, across. The number of finished chips depends on their size and the share that work correctly after manufacturing.

TSMC is expanding 3 nanometer capacity while advancing its newer 2 nanometer technology. Chang said customers were moving from 5 nanometers toward 2 nanometers. Demand also supports continued investment in 3 nanometers, including an additional Tainan factory scheduled for commercial production in the first half of 2028.

AI demand reaches beyond the processor

Chang said AI computing had become a priority for TSMC's customers and their customers, pushing companies to obtain more processing capacity. He pointed to the rapid rise of agentic AI over the preceding nine months as a driver of sharply accelerating demand.

Agentic AI describes software that can carry out a sequence of tasks toward a goal, rather than simply answering a single question. A system might plan several steps, call other software and check its results. Each stage can require further computation, increasing the workload placed on chips and data centers.

TSMC's planning therefore extends beyond the factories that make logic chips. Chang identified electricity supply and substrates as constraints. A substrate supports a chip package and provides electrical connections between the chips and the wider system.

Advanced packaging is another part of the expansion. It connects chips closely together so they can exchange information efficiently. Chang said meeting AI demand would require progress in packaging alongside transistor and wafer manufacturing technology. For customers, more processors are useful when power, connections and other necessary components are ready at the same time.

Sony venture has a different owner and purpose

Sony Semiconductor Solutions and TSMC announced their definitive agreement on August 11, 2026, to establish Advanced Vision Semiconductor Manufacturing Corporation in Koshi. Their joint venture agreement sets out a hub for developing and manufacturing advanced image sensors for smartphones.

The companies gave a specific production target in their joint announcement:

The JV is expected to commence volume production in 2029.

Sony will be the sole controlling shareholder, and the venture is planned to become a consolidated subsidiary of Sony Group. Sony also plans to appoint its representative director. This differs from Japan Advanced Semiconductor Manufacturing, or JASM, the operator of the two logic chip factories, in which TSMC holds approximately 86.5%.

Sony intends to lead core image sensor technology development, product planning and product design. TSMC will contribute its advanced process technology and manufacturing expertise. The transaction remains subject to regulatory approvals and customary closing conditions.

Chang's Physical AI ambitions extend the commercial rationale beyond the smartphone market named in the agreement. Machines that interact with their surroundings need information about what is around them. Image sensors can provide that visual input, while logic chips process it and support decisions.

How the investments and subsidies fit together

Sony plans contributions of approximately 465 billion yen to the image sensor venture through cash and the transfer of assets, including its newly constructed Koshi factory. TSMC plans cash contributions of approximately 282 billion yen. Together, the announced contributions amount to about 747 billion yen, although Sony's portion includes property as well as money.

The companies expect to make those contributions in phases according to market demand and business conditions. Investment needed to achieve the venture's planned production capacity is being considered on the premise of Japanese government support.

JASM's second factory has a separate funding framework. The revised approved equipment investment plan is US$10.8 billion, down from US$12.2 billion, while the maximum government subsidy has fallen from 732 billion yen to 645.15 billion yen. The broader project investment is reported to reach at least US$15.7 billion, with final expanded capacity dependent on government support.

The approved equipment budget and the broader investment estimate cover different spending measures. Readers following the project's cost need to keep both figures attached to their respective scope. TSMC has not confirmed a final total for the expanded project.

The first factory's revised subsidy ceiling is 409.5 billion yen. Adding that to the second factory's 645.15 billion yen gives a combined ceiling of 1.05465 trillion yen for the two JASM factories. These ceilings set the maximum public assistance under the plans.

The first factory retains a separate role

JASM's first factory began mass production in late 2024, with its first shipment in December that year. Chang said it was now fully operational. Under the October 2026 revision, its planned capacity is 50,000 wafers a month, compared with 55,000 in the earlier plan.

The revised product mix centers on 22 and 28 nanometer logic chips, with 40 nanometer production also included to meet domestic demand. The earlier references to 12 and 16 nanometer production have been removed. Its revised equipment investment is US$7.3 billion, compared with US$8.6 billion previously.

Those changes give the neighboring factories more distinct roles. The first serves demand for established manufacturing technologies, while the second is being prepared for more advanced logic production. TSMC's Japanese partners connect the operation to major customer industries: Sony holds approximately 6% of JASM, DENSO 5.5% and Toyota 2% under the ownership plan announced in 2024.

Chang said the automotive industry's increasing use of electronics and intelligent functions would raise semiconductor demand. Japan currently accounts for about 4% of TSMC's global revenue, he said, leaving room for growth through the country's diverse technologies and applications.

Kumamoto's utilities and communities are part of the plan

Chang said advanced semiconductor factories require substantial land, water and electricity, making relationships with governments and communities essential. He thanked Japan's central government and Kumamoto authorities for their support and pointed to Japan's strengths in semiconductor materials, technology and supply chains.

Kumamoto's water resources make local coordination especially important. The region relies almost entirely on groundwater for its public water supply, supporting about one million people as well as industry. Semiconductor development adds industrial demand to that shared resource. JASM has committed to groundwater replenishment exceeding the volume it uses.

Growth is also affecting daily travel and housing. Kikuyo, Koshi and Ozu recorded 38 major congestion locations in 2025, about 40% more than in 2021. The three municipalities gained a combined 5,465 residents compared with the 2020 census, alongside rising local pressures involving traffic, rents and competition for workers.

TSMC's 2024 expansion announcement projected more than 3,400 direct technology jobs across the two factories. Turning that investment into sustained local gains requires roads, utilities and services that can keep pace with factory development. For residents, those practical changes are already part of the semiconductor expansion, well before the second factory's first advanced chips are shipped.

The milestones from expansion to production

Kumamoto's development now stretches across several investment and production schedules. The main milestones show how the logic chip expansion and image sensor partnership have progressed:

• February 6, 2024: TSMC and its Japanese partners announce a second JASM factory, initially targeting operations by the end of 2027.
• December 2024: The first Kumamoto factory makes its initial shipment as mass production begins.
• February 2026: TSMC discloses plans to bring 3 nanometer technology to the second factory.
• August 11, 2026: Sony and TSMC announce their binding agreement for the Koshi image sensor venture.
• October 16, 2026: Japan approves revised production plans for both JASM factories.
• November 11, 2026: Chang outlines further Kumamoto expansion and closer Sony cooperation at the Tokyo forum.
• Fourth quarter of 2028: The second JASM factory is scheduled to make its first shipments.
• 2029: The separate Sony and TSMC image sensor venture expects to begin volume production.

Chang also pointed to TSMC's approaching 40th anniversary in 2027, describing accumulated technology, expertise and customer trust as strengths that competitors would need time to build. In Japan, the next concrete tests are delivering the approved 3 nanometer production schedule and completing the separate image sensor venture's preparations.

Key Points

• TSMC plans initial second factory capacity of 6,000 wafers a month using 3 nanometer technology, with first shipments in late 2028.
• The first Kumamoto factory is operating, with a revised plan centered on 22, 28 and 40 nanometer chips.
• Sony and TSMC's separate image sensor venture targets volume production in 2029, with Sony retaining control.
• AI demand is increasing pressure on chip manufacturing, advanced packaging, substrates and electricity supplies.
• Government support and local infrastructure remain central to Kumamoto's semiconductor expansion.