Chip giant TSMC to invest $100 bil. to meet rising demand

21, Apr. 2021

A staff handling a wafer in a TSMC foundry. The company will boost 5nm chip output in the second half of 2021. (Photo courtesy of TSMC)
A staff handling a wafer in a TSMC foundry. The company will boost 5nm chip output in the second half of 2021. (Photo courtesy of TSMC)

By Gloria Cho

TAIPEI, NNA – The world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Co., plans to fork out $100 billion to expand chip fabrication over three years starting from 2021 to profit from the strong demand for 5G technology and high-performance computing (HPC).

Revising revenue upwards from 15 percent to 20 percent, TSMC has also decided to raise its full-year capital expenditure to around $30 billion, up from the $28 billion announced previously.

The significant investment outlays reflect its optimistic outlook for this year and beyond, said its top executives at an online first-quarter earnings conference last week. TSMC made a Q1 revenue of $12.9 billion, or a 25 percent jump year-on-year on the back of robust HPC growth.

It expects to outperform the overall semiconductor market excluding memory chips, which is set to grow by about 12 percent with the foundry sector likely to expand by 16 percent.

As the company has seen stronger engagement with more customers for 5-nanometer and 3-nanometer chips recently as compared to three months ago, it will invest in the advanced and specialty technologies to support customers’ structural growth, said Wendell Huang, vice president and chief financial officer of TSMC.

TSMC will earmark 80 percent of this year's capex for the advanced technologies, while the rest will go to advanced packaging, mass making and specialty technologies.

Increasing digitalization during the COVID-19 pandemic last year and worsening geopolitical tensions upsetting the balance in the supply chain have accelerated the frenzied demand for chips and panic stockpiling by global companies.

This has resulted in a dire scarcity worldwide, disrupting the production of gadgets, appliances and cars in past months.

Last week, a top executive of China's Huawei Technologies Co. said America's sanctions against his company had weakened trust in the global semiconductor industry, with many companies abandoning their zero-inventory policy to stockpile chip inventories for six months or longer.

“We can’t rule out the possibility of inventory correction or overbooking, but we expect the structural demand to continue,” said TSMC CEO and vice chairman C.C. Wei during the conference call.

He expects the raging demand and shortage to persist throughout the year, and maybe extend to 2022.

In recent months, TSMC has made automotive customers its top priority, even relocating wafer production to support them. Wei expects their shortage to be eased significantly in the second quarter.

Smartphone chips accounted for 45 percent of Q1 revenue, down 11 percent on quarter, while the contribution from HPC chips shot up by 14 percent to 35 percent.

The semiconductor giant foresees its April-June revenue to be flat, settling somewhere between $12.9 billion and $13.2 billion.

TSMC expects strong demand for 5-nm chips, driven by smartphones and HPC applications. It will enter volume production in the June-December period, and contribute 20 percent to wafer revenue this year.

The company will launch the risk production of N4 (4nm process technology), part of its 5nm process family, in the second half of this year before its volume production in 2022.

The 3nm process technology will enter risk production later this year followed by volume production in the second half of 2022

On its expansion plans abroad, TSMC said the construction of its new $12 billion Arizona plant is progressing well. It will start its 5-nm process and churn out 20,000 wafers each month when ready in 2024.

TSMC president and co-CEO Mark Liu said he is confident that the foundry will be a success as it has the support of the U.S. government’s bi-partisan collaboration. He was speaking to the media after attending a White House meeting for representatives of major chipmakers, tech firms and car makers, on April 12.

Having acquired a large piece of land in Arizona, the chipmaker might expand in the U.S., maybe starting with phase one production with further developments depending on operational efficiency, economic cost, and customer demand, said Wei.