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Taiwan Semiconductor Manufacturing is firing on all cylinders and that is bad news for the former chip leader Intel (INTC).

On Thursday, TSMC (ticker: TSM) reported better-than-expected third-quarter earnings and significantly raised its capital-expenditure plans for this year.

“Our third-quarter business benefited from new product launches both in premium smartphones and high-performance computing [HPC] applications using TSMC’s industry-leading 7-nanometer technology,” said Wendell Huang, chief financial officer of TSMC, in the news release. “We expect the strength of demand for our 7-nanometer technology will continue, driven by high-end smartphones, initial 5G deployment and HPC-related applications.”

TSMC has consolidated its market share in recent years because its foundries were the first to offer 7-nanometer (nm) chip production at significant volume. Smaller nm chips offer greater performance and improved power efficiency. The entire chip industry is rapidly trying to get to smaller manufacturing processes, but most manufacturers have yet to make the transition to 7nm in volume.

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The company raised its capital-spending plans for 2019 to a range of $14 billion-$15 billion. In July, TSMC said its capex spending would likely exceed the high end of its $10 billion-$11 billion guidance range.

On its conference call with investors, TSMC noted “very strong” demand for its 7nm process. Of the roughly $4 billion increase in capital-spending plans this year, $1.5 billion was for 7nm capacity and $2.5 billion was for 5nm capacity.

TSMC’s results and capex increase bodes well for its technology leadership position for the next few years, according to Bernstein analyst Stacy Rasgon. He rates TSMC at Market Perform and Intel at Underperform.

“The move suggests that Intel’s process disadvantage is getting worse,” Rasgon wrote in a report published Friday. “While Intel will theoretically have 7nm parts out sometime in 2021...we believe it likely that CPU and other mainstream 7nm parts will not be on the road map until late that year, if not sometime in 2022.”

Intel declined to comment on the report.

Rasgon wrote that by the time Intel gets 7nm production going, TSMC will likely be making 3nm chips for much of Intel’s 7nm lifespan.

“Hence any hopes of Intel’s ability to ‘close the process gap’ seem forlorn, unless TSMC drops the ball (which, as of this moment, they are showing no signs of),” he said.

It looks like investors are getting on the same page and crowning a new chip king. TSMC American depositary receipts are up 34% this year, reaching a market value of about $250 billion, while Intel stock is up roughly 10% year to date, leading to an approximate $230 billion value.

Write to Tae Kim at tae.kim@barrons.com