A new chip factory opens in Singapore, and its chairman says AI is crowding out capacity for other chips

VSMC's first fab is in trial production and sold out for its first phase. The chairman of its Taiwanese parent says orders cannot all be met and a second fab is being studied.

28 September 2026 · 5 min read · L2 Silicon · The Pulse, 28 September 2026

What happened

VSMC opened its first factory on 28 September in Tampines, Singapore. VSMC is a joint venture set up in September 2024 by Vanguard International Semiconductor, a Taiwanese chipmaker, and NXP Semiconductors. Its release says construction took 22 months from the groundbreaking in December 2024, that the fab is now in risk production, a trial phase, and that volume production begins in the first quarter of 2027. The first sample batch came out with yields above 99 percent, meaning almost every chip on it worked.

The plant makes chips on 12-inch silicon wafers with well-proven processes, from 130 down to 40 nanometres. They are used for mixed-signal, power management and analog chips, and for interposers, the thin layers that link several chips side by side inside one package. At full capacity by 2029, VSMC expects about 44,000 wafers a month and around 1,600 jobs. That is about 528,000 wafers a year.

The money behind it is large for Vanguard. Economic Daily News reported that about 85 percent of Vanguard's capital spending this year, which it put at 60 to 70 billion Taiwan dollars, goes to VSMC, and that the manufacturing technology is licensed from TSMC. Fang also told Next Apple News why customers are coming to Singapore: in today's geopolitics, he said, the country is relatively neutral and less exposed to global tensions, which makes it a good choice for customers with those concerns.

Economic Daily News, the Taiwanese financial paper, reported from the opening that the whole project is worth about $7.8 billion, with Vanguard holding 60 percent and NXP 40 percent. It reported that customers have committed to all of the first phase's capacity, and that some have agreed to take more interposers. The paper added that the planned full capacity of 44,000 to 45,000 wafers a month is lower than the 55,000 first planned, because the product mix changed.

Why it matters

Vanguard's chairman, Leuh Fang, told Next Apple News at the opening that orders are arriving faster than the company can fill them: "訂單進來已經沒辦法全部滿足" (orders coming in can no longer all be met). His explanation was AI. "全球AI投資大趨勢帶來大量產能推擠效應" (the global wave of AI investment is crowding capacity), he said, and "許多非AI應用產能遭到排擠" (a lot of capacity for non-AI uses is being squeezed out). He expects supply to stay short of demand in the near term.

That is the less visible side of the AI build-out. The chips on this line go into cars, phones, factory equipment and power supplies. If AI work is taking factory time that used to go to them, new plants for older processes matter to everyone who buys those products, not only to AI companies.

What would change it

The first test is volume production in the first quarter of 2027, on time or not. The second is a second fab. Fang said VSMC is studying one but is in no hurry: it has to confirm that demand is long-term and structural before committing, though he expects a second fab to be easier to build than the first once it starts. Economic Daily reported that the full build-out could finish in 2028 instead of 2029.

What we do not know

VSMC's release gives no investment figure, so the $7.8 billion rests on the Taiwanese press report. No customer is named, and the release does not say how much of the capacity goes to interposers for AI chips as opposed to chips for cars and industry. The technology and budget for a second fab are not settled, by Fang's own account.

What this changes for you

Nothing this year: the plant is still in trial production. If Fang is right that AI demand is squeezing out capacity for everyday chips, plants like this are one of the few ways that squeeze eases, and the earliest that can start here is 2027.

Sources

Everything above is written from these. Each line says what that document proves.

1. globenewswire.com: VSMC's own release, 28 September 2026: the opening, risk production, volume production from the first quarter of 2027, yields above 99 percent on the first sample lot, 130 to 40 nanometre processes and the product types, about 44,000 wafers a month and about 1,600 jobs by 2029.
2. money.udn.com: Economic Daily News (Taiwan), reporter at the opening, 28 September 2026, in Chinese: about $7.8 billion in total, the 60 and 40 percent split, first-phase capacity fully committed by customers, extra interposer demand agreed, full capacity of 44,000 to 45,000 wafers against 55,000 first planned, and a possible 2028 finish.
3. news.nextapple.com: Next Apple News (Taiwan), reporter at the opening, 28 September 2026, in Chinese: Leuh Fang's words on orders that cannot all be met, AI crowding out non-AI capacity, and the conditions for a second fab.

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