There will be strong demand for ICs for the next few years, and TSMC is responding by increasing spending on more capacity, mostly in Taiwan.
Taiwan Semiconductor Manufacturing Co. (TSMC) has again raised its 2021 capital expenditure target to $30 billion after customer demand exceeded the company’s expectations three months ago.
The world’s biggest chip foundry, which is running full tilt with capacity utilization in the neighborhood of 100%, in January was aiming for capex this year to reach about $28 billion. The new $30 billion figure nearly doubles the $17.2 billion the company spent in 2020.
TSMC said during a conference call with analysts that it upgraded the target in order to meet increasing demand for advanced and specialty technologies in the next several years. About 80% of the budget will go to leading process technologies, including 3nm, 5nm and 7nm, with the remaining 10% earmarked for advanced packaging and mask making, and about 10% for specialty technologies.
“We are witnessing a structural increase in underlying semiconductor demand as a multi-year megatrend of 5G and HPC (high-performance computing)-related applications are expected to fuel strong demand for our advanced technologies in the next several years,” TSMC CEO C.C. Wei said on the call. “Covid-19 has also fundamentally accelerated the digital transformation, making semiconductors more pervasive and essential in people’s lives.”
Wei added that TSMC expects to invest about $100 billion during the next three years to increase capacity and R&D for leading-edge and specialty technologies, at the same time helping to strengthen confidence in global supply chains.
Some analysts found the forecast a surprise.
“This is the first time for TSMC to announce a multi-year capex,” Goldman Sachs analyst Bruce Lu said during the call. “This suggests very, very strong growth even beyond 2023.”
TSMC said it expects customers and the supply chain to prepare for higher levels of inventory throughout 2021, which will persist into 2022 given the industry’s continued need to ensure supply security. That expectation comes as chip buyers ranging from Apple to Volkswagen have been forced to idle production lines for smartphones and automobiles because of semiconductor shortages.
TSMC said that snowstorms in the US state of Texas as well as factory disruptions in Japan have impacted global chip production. A drought in Taiwan should have no impact on TSMC’s output, according to CEO Wei.
The company that’s a bellwether for the electronics industry said that for 2021, the overall semiconductor market, excluding memory, will grow by about 12% while foundry will expand by about 16%. TSMC’s revenue growth will be around 20%, the company said. While TSMC declined to say it will raise prices for the silicon wafers it makes, the company noted that it aims to “firm up” wafer pricing while it works to deliver cost improvement.
In the meantime, the company said it is on track with bringing new production technology to bear. TSMC will ramp up its 4nm process (a 5nm extension) during the second half of 2021, and start volume production in 2022.
The company will initiate 3nm commercial production in the second half of next year.
TSMC departed from its usual practice of not talking about customers in response to a question from Credit Suisse analyst Randy Abrams regarding Intel’s $20 billion plan to re-engage in the foundry business in renewed competition with TSMC.
“Intel is an important customer, and we will collaborate in some areas and compete in other areas,” Wei said. “We always work with our customers to develop the necessary technology to support their products. We do not have internal products that compete with our customers. So we can be the trusted technology and capacity provider for years to come.”
In response to a question from Abrams regarding geopolitical issues that TSMC faces from governments in the US, Europe and China to move more production around the globe, Wei said Taiwan will continue to be the focus for TSMC. The company’s R&D and main production lines will continue to be located on the island, he said.
Wei said that with a new commitment from the Taiwan government to expand educational programs, TSMC will be able to find sufficient engineering talent on the island.
Even so, the company said that it may expand its new project in the US state of Arizona.
“We are starting in 2024 with a 20,000 wafer-per-month 5nm technology,” Wei said. “But in fact, we have acquired a large piece of land in Arizona to provide flexibility. So further expansion is possible.”
Based on the operational efficiency and cost economics in Arizona as well as customer demand, TSMC will decide its next steps, he said.
This article was originally published on EE Times.
Alan Patterson has worked as an electronics journalist in Asia for most of his career. In addition to EE Times, he has been a reporter and an editor for Bloomberg News and Dow Jones Newswires. He has lived for more than 30 years in Hong Kong and Taipei and has covered tech companies in the greater China region during that time.