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TSMC eyes expansion in US, Japan to meet sustained chip demand

TAIPEI :Taiwan's TSMC posted an 11per cent rise in quarterly profit and record revenue on Thursday, boosted by a pandemic-led surge in global demand for chips that power devices such as smartphones and laptops.

TSMC eyes expansion in US, Japan to meet sustained chip demand

FILE PHOTO: The logo of Taiwan Semiconductor Manufacturing Co (TSMC) is pictured at its headquarters, in Hsinchu, Taiwan, January 19, 2021. REUTERS/Ann Wang

TAIPEI -Taiwan Semiconductor Manufacturing Co Ltd (TSMC) signalled on Thursday plans to build new factories in the United States and Japan, riding on a pandemic-led surge in demand for chips that power smartphones, laptops and cars.

TSMC, which posted record quarterly sales and forecast higher revenue for the current quarter, said it will expand production capacity in China and does not rule out the possibility of a "second phase" expansion at its US$12 billion factory in the U.S. state of Arizona.

The world's largest contract chipmaker and a major Apple Inc supplier also said it is currently reviewing a plan to set up a speciality technology wafer fabrication plant, or fab, in Japan.

TSMC's overseas expansion plans come amid concern over the concentration of chipmaking capability in Taiwan, which produces the majority of the world's most advanced chips and is geographically close to political rival China, which does not rule out the use of force to bring the democratic island under its control.

Taiwan and TSMC have also become central in efforts to resolve a pandemic-induced global chip shortage that has forced automakers to cut production and hurt manufacturers of smartphones, laptops and even appliances.

"We are expanding our global manufacturing footprint to sustain and enhance our competitive advantages and to better serve our customers in the new geopolitical environment," TSMC chairman Mark Liu told an analyst call.

"While our overseas fabs are not initially able to match the costs of our manufacturing operations in Taiwan, we will work with governments to minimise the cost gap," Liu said.

He did not give details of its plans in America and Japan, adding the company was working to "firm up" wafer prices to reflect cost increases.

Reuters reported in May TSMC was eyeing expansion in Arizona beyond the one currently planned.

Liu said TSMC was also planning a capacity expansion in China's Nanjing due to the "urgent need" of clients, using the mature 28 nanometre semiconductor manufacturing technology.

It is scheduled to enter production next year and will eventually reach a production of 40,000 wafers per month by mid-2023, he said.

AUTO-CHIP SHORTAGE EASING?

Revenue for April-June at TSMC, Asia's most valuable manufacturing company, climbed 28per cent to a record US$13.29 billion.

For the quarter ending in September, TSMC forecast revenue of US$14.6 billion to US$14.9 billion, compared with US$12.1 billion in the same period a year earlier.

TSMC said the auto chip shortage will gradually reduce for its customers from this quarter but expects overall semiconductor capacity tightness to extend possibly into next year.

The Taiwanese firm, which also makes chips for Qualcomm Inc, had previously flagged a US$100 billion expansion plan over the next three years, as fifth-generation telecommunications (5G) technology and artificial intelligence applications drive global demand for advanced chips.

"Moving into the third quarter, we expect our business to be supported by strong demand for our industry-leading 5 nanometre and 7 nanometre technologies, driven by all four growth platforms, which are smartphone, HPC, IoT and automotive-related applications," Chief Financial Officer Wendell Huang said.

Analysts are bullish about TSMC's business in the coming quarters, citing strong demand for the company's most advanced 5 nanometre node technology as well as its upcoming 3 nanometre node, which is scheduled to enter trial production later this year.

For the second quarter, TSMC said profit rose 11per cent to TUS$134.4 billion (US$4.81 billion) from a year earlier, just short of an average estimate of TUS$136.5 billion, drawn from 19 analysts by Refinitiv.

Shares of TSMC, the eleventh most valuable listed company in the world, have gained about 16per cent so far this year, giving it a market value of US$567 billion, more than double that of chipmaker Intel Corp.

TSMC's stock closed up 0.16per cent on Thursday, compared with a 1.1per cent gain for the benchmark index.

(US$1 = 27.9320 Taiwan dollars)

(Reporting By Yimou Lee and Ben Blanchard; Editing by Sayantani Ghosh and Muralikumar Anantharaman)

Source: Reuters

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