would you agree TSMC's capacity is expanding while Intel's is contracting.
Intel's capacity is not contracting. That's like government "cutting a budget" by slowing the growth thereof.
I'm not very familiar with TSMC's current capacity vs. future needs, but I figure TSMC can tolerate lower gross margins and pursue pure volumes while Intel is more reluctant to tank margins in order to pursue market share.
From a quality perspective, TSMC does not have the best process out there. But what they do have is a willingness to be a strong commodity player in SoC. They pretty much want to do to mobile SoCs what Japan did to the memory market in the early 80's, and that's by flooding it.