Technology Apr 23

TSMC approves $2.89-bn in new spending to address chip shortage

Taiwan semiconductor maker's announcement follows plans to invest $100-bn over next three years to increase capacity and overcome impact of drought on the island

TSMC approves $2.89-bn in new spending to address chip shortage
The Taiwanese company, clients of which include Apple and Qualcomm, has said it's working hard to boost productivity and alleviate the worldwide shortage but noted that supply tightness is likely to continue into next year. File photo by Reuters.

(ATF) Taiwan Semiconductor Manufacturing Co's board has approved $2.89 billion in spending to increase capacity, responding to a chip shortage that has slowed global industry.

The world's largest contract chipmaker said the spending would be "for the purpose of installing mature technology capacity" and did not elaborate.

TSMC this month said that it plans to invest $100 billion over the next three years to increase capacity at its plants, days after Intel announced a $20-billion plan to expand its capacity.

"TSMC - as well as Samsung and Intel - are increasing logic and foundry investment with an eye on medium to long-term market expansion," Masahiro Nakanomyo, an equity analyst at Jefferies in Tokyo, said.

The Taiwanese company, clients of which include Apple and Qualcomm, has said it is working hard to increase productivity and alleviate the worldwide shortage but noted that supply tightness is likely to continue into next year.

Its business has also been boosted by the chip shortage that initially forced automakers to cut production but is now also hurting manufacturers of smartphones, laptops and even household appliances.

DROUGHT PRESSURE

However, its plans to expand have been frustrated by an ongoing drought in Taiwan. The chipmaking process requires large amounts of water.

TSMC said it is building a plant capable of treating industrial water so it can be reused to make semiconductors in what would be the world's first such advanced industrial wastewater treatment centre.

The factory in the southern Taiwanese city of Tainan will start operating by the end of 2021, Lora Ho, senior vice president of Europe and Asia sales, said on Thursday.

Taiwan is facing its worst drought in more than 50 years.

STOCK GROWTH

TSMC's stock growth was primarily driven by Intel’s shortage of chips in 2020, according to Nica San Juan, a technology equity analyst at StockApps.

Intel is planning to tap TSMC to help it make an enhanced 7-nanometre process - the current state of the art in semiconductor manufacturing - slated for release in 2023. Later in 2021, it also plans to work on the more advanced 3-nanometre process.

“As the largest independent manufacturer of tech chips in the world, standing three times as large as its nearest foundry competitor, TSMC provides the engine room of global technology," Ben Barringer, equity research analyst at Quilter Cheviot in London, said.

“They’ve started the first quarter of the year in much the same vein as 2020, with 17% year-on-year growth driven by the uptake in cloud technology, the further adoption of 5G smartphones and of course, the auto market," he added.

"They do, however, expect to see supply shortages for at least the next three to six months, partly as a result of the pandemic disrupting supply chains across the world," Barringer said.

With reporting by Reuters

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