Taiwan Semiconductor Manufacturing Company (TSMC) said in a legal announcement to the Taipei Stock Exchange on April 1 that the company will use the funds for manufacturing and research and development of “leading-edge technologies” over the next three years to “meet the needs of the market. The announcement also specifically mentioned the demand for chips for 5G and high-performance devices.
Brady Wang, an analyst at market analyst firm Counterpoint Research in Taipei, said the amount would set a record dollar value for TSMC.
Taipei Puhua (PwC) business law firm general manager (managing director) Zhang Jiajian (Kent Chong) said TSMC’s investment will ease customers’ “concerns” about the instability of the semiconductor supply chain, which is caused in part by U.S.-China trade tensions. A number of U.S. hardware developers, including Apple, are TSMC’s customers.
Overall, this will undoubtedly increase production capacity,” said Zhang Jiajian. “He added that U.S. customers want to source chips in the United States. The company, based in southwest Taipei, has plans to invest $12 billion in a factory in the U.S. state of Arizona. “TSMC is clearly a leader in bringing the entire supply chain into the U.S.,” said Chang.
In its filing with the stock market, TSMC said the company “is working closely with customers to meet their needs in a sustainable manner.”
However, analysts warned that despite TSMC’s investments, the growing demand for chips and the lag in building new factories will keep the shortage going for years.
“You can invest heavily, but that doesn’t solve the problem,” said Sean Su, an independent political and technology consultant who is based in Taipei.
He said the popularity of home devices during the new epidemic (which increased demand for chips) and the “hybrid” offline economy after the epidemic could lead to long-term demand for chips.
“Demand is already over the cap,” said Su Xiang, “and people want smartphones. People want all kinds of things more than ever. People suddenly want tablets. And every kid in the house now needs a computer, rather than sharing a computer with someone else.”
Remote research and remote work are two trends that emerged during the New Crown outbreak in 2020, which raised the demand for the chips needed for high-speed laptops. This trend is based on the demand for new 5G smartphones and artificial intelligence devices ahead of the epidemic.
Automakers joined the bandwagon last year, when they ordered chips for self-driving cars and electric vehicles. Wen Liu, an industry analyst at the Taipei-based Market Intelligence & Consulting Institute, said they will have to wait until at least early 2022 because of the current chip shortage, as production capacity is now ” full capacity”.
Market research firm Gartner said that by 2024, global chip demand will increase from $450 billion last year to about $600 billion. Industry revenues have already grown by 5.4 percent from 2019 to 2020, according to market information provider International Data Corporation (IDC). TSMC and South Korean tech giant Samsung are currently the largest chipmakers, producing the highest-grade chips.
Chinese semiconductor customers will feel additional pressure due to restrictions introduced by former U.S. President Donald Trump’s administration, said Su Xiang. The Trump administration has barred U.S. companies, including those based overseas, from working with Chinese companies deemed to be national security risks.
“They will be affected by the trade embargo [in mainland China],” said Su Xiang, “and companies will be competing for limited batches of high-end processors every year.”
In late 2020, chip buyers in mainland China include the developers of three smartphone brands. These three cell phone brands are three of the top five smartphone brands with the largest market share in the world.
Technology analysts believe most of the world’s chipmakers, such as the growing mainland China-based Semiconductor Manufacturing International Corp. are lagging behind in terms of equipment and technology to produce low-power fast chips. TSMC’s investment will help maintain its leadership position, Wang said.
He said: “This is actually because (TSMC) sees a new opportunity, which is mainly in terms of the demand for 5G or high-performance personal computers or other digitalization, which is the demand after the new crown epidemic.” He added that TSMC itself may not expect to alleviate the current chip shortage with the planned $100 billion.
TSMC said in its stock exchange announcement that “the multi-year megatrend …… is expected to drive strong demand for our semiconductor technology in the coming years” and that the New Crown pandemic “will accelerate digitalization in all aspects “.
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