TSMC Announces 60% Auto Chip Production Increase After Meeting With U.S. Secretary

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The Taiwan Semiconductor Manufacturing Company (TSMC) has announced that it has increased automotive chip production by 60% over last year's levels. TSMC's announcement came after it attended the United States Department of Commerce's Semiconductor Video Summit yesterday, where Commerce Secretary Gina Raimondo joined company representatives, and representatives from several firms including Intel Corporation, Amazon, Ford and General Motors were also present.

The summit follows once held by the White House earlier this year, and it focused exclusively on the ongoing automobile chip shortage and ways through which the public and private sector can mitigate the crisis.

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The announcement, made yesterday, comes after the fab was reported to have kicked off a Super Hot production run earlier this year exclusively for automobile chips. This run came as the car industry faced a severe demand-supply mismatch in the aftermath of China's surprising early recovery from the current pandemic.

Representing TSMC at the event were the company's Chairman, Mr. Liu Deyin and Mr. Rick Cassidy, who is the fab's chief strategy officer and the head of its Arizona foundry.

The bulk of products that automakers source from TSMC are microcontrollers. These are responsible for managing a vehicle's computer-based functions and are crucial for everyday functions.

Their importance is highlighted by Tesla Inc's decision to design and develop new microcontrollers for navigating the chip shortage. In its shareholder's deck for the first quarter of this year, the company wrote:

In Q1, we were able to navigate through global chip supply shortage issues in part by pivoting extremely quickly to new microcontrollers, while simultaneously developing firmware for new chips made by new suppliers.

Water tankers exit TSMC's fab in Taiwan as it navigates a historic drought and chip demand. Image: CNA

After the event, TSMC announced that it would increase microcontroller production by 60% this year in order to help the automotive sector navigate the current shortage. This increase is over the fab's chip production levels in 2020, and when compared to 2019 microcontroller production, it marks a 30% production growth. Microcontrollers accounted for 4% of TSMC's overall sales in the first quarter of this year, after having grown by one percent over the fourth quarter of 2020.

Compared to semiconductors used in consumer electronics, microcontrollers and other automotive chips have longer certification times, are not easily replaced after being installed in a car and have to clear tough regulatory standards.

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TSMC also highlighted the steps that it will take to improve its supply chain coordination with the automakers. It promised to modernize its 'Just-in-Time' or lean supply chain management methods. These methods manage order and delivery times to ensure that goods reach a company only when needed. By doing this, they ensure that inventories do not build up, and manufacturers can prioritize production.

In a statement released after the event, Secretary Raimondo shared her support for developing an American chip supply chain. In addition, chip industry executives have pressed the government to enable funding through the U.S. Chips Act, which will aid giant technology companies and others in developing leading-edge chip manufacturing technologies in the U.S.

While the United States has traditionally enjoyed a technological lead over Asian chip manufacturers, TSMC's rapid prowess in the area has brought both regions on equal footing. When combined with China's renewed focus on developing a chip sector of its own and no U.S.-based fab being able to compete with TSMC, calls for investment into the sector have increased over time.

In her statement made after the event, the Commerce Secretary stated that:

Today was another opportunity to engage leaders from the semiconductor ecosystem and I will continue to bring stakeholders together as we work to address our supply chain challenges. On Monday, I am headed to Micron Technology in Manassas, Virginia to tour their fab, and I will be joined by Micron CEO Sanjay Mehrotra, Senator Mark Warner, and Senator John Cornyn.

These conversations crystalize the need for the American Jobs Plan’s $50 billion investment to ensure that the government has the ability to monitor supply chain issues and the remit and tools to address them. Passing funding for the CHIPS Act must be a priority, and I am encouraged by the bipartisan group of U.S. Senators who are working to get this done.

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