TSMC Open To U.S. Plant Expansion & Expects Chip Shortage To End Next Year

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The Taiwan Semiconductor Manufacturing Company (TSMC) is open to expanding its chip construction facility in the United States, confirmed company officials during its earnings conference for the second quarter of this year. TSMC, the world's leading contract chip manufacturer, has been thrown into the limelight following American sanctions against Chinese telecommunications firm Huawei Technologies Ltd. and the ongoing pandemic, resulting in a demand increase for semiconductors and strained global supply chains.

During the event, TSMC's Liu Deyin also shared details about the ongoing chip shortage, which has affected automotive and consumer electronics products. He believes that the supply situation will improve in the third quarter of this year, and his company has managed to increase microcontroller output by 60%. Microcontrollers are the primary automotive products manufactured by TSMC and were at the center of the chip shortage that started earlier this year.

TSMC Working on Enhanced 3nm Technology, With Volume Production Expected in H2 2023

TSMC Cites Customer Enthusiasm To Keep U.S. Chip Plant Expansion On The Cards

The focus of the management call revolved around TSMC's new chip plant in the Chinese province of Nanjing, its facility in the United States and the tight global supply chains. Prior to today's event, market rumors in Taiwan speculated that the United States was pressuring TSMC to hold its expansion plans for the Nanjing plant. This plant is equipped to manufacture chips on the 28nm and 16nm process nodes and is part of TSMC's attempt at increasing its output for the mature chip segment.

According to Mr. Deyin, the U.S. is aware of the second phase of construction for the Nanjing plant and that the fab's construction falls in line with TSMC's global chip production capacity expansion.

He also refused to rule out a potential expansion of TSMC's new chip plant in Arizona. The executive reiterated TSMC's original output plan of producing 20,000 silicon wafers with chips built through the 5nm node.

TSMC's render of its Arizona fab shared during its tech symposium last month. Image: Taiwan Semiconductor Manufacturing Company

Rumors of a planned expansion have surfaced several times this year, speculating that the company might add more production lines and factories and increase the output from 20,000 wafers to 100,000 wafers per month. During the conference, Mr. Deyin outlined that TSMC's primary objective with its global capacity expansion plan is to ensure supply chain security and customer order integrity. He stated that both are interrelated, as a secure supply chain ensures that his company's customers receive their chip orders on time.

He also highlighted that by the time TSMC's Arizona fab is operational (by 2024, according to TSMC's current plans), the 5nm process node will be the most advanced commercially available chip process in the U.S. Therefore, Mr. Deyin believes that since TSMC's customers have welcomed plans for an American fab with open arms, a second-stage expansion can not be ruled out in the light of this enthusiasm.

TSMC: Chip Shortage Will Continue in 2022, 2nm Mass Production In 2025

Commenting on the automotive chip shortage, the executive believes that the shortage will last throughout this year and should improve by 2022. He also expects that demand for consumer applications such as fifth-generation (5G) and high-performance computing products will only continue to increase.

TSMC provides most of the world's leading technology firms with their chips. Firms such as Cupertino tech giant Apple Inc, Santa Clara chip designer Advanced Micro Devices, Inc (AMD), Qualcomm Incorporated and NVIDIA Corporation use the company's fabs for their products. TSMC's growing dominance in the chip sector took a boost earlier this month when it was reported that Intel would also secure some of its processors from the company, marking a rare occasion for the Santa Clara chip giant to introduce and design products not manufactured through its own chip plants.

The author has no position in any of the stocks mentioned. WCCF TECH INC has a disclosure and ethics policy.
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