Expansion Plan by World’s Largest Contract Chipmaker Won’t Ease Global Shortage:
April 12, 2021
Plans by the world's largest contract chipmaker for a record $100 billion
capacity expansion will just mildly dent a growing worldwide shortage of
semiconductors for gear such as high-speed notebook computers, 5G smartphones
and newer vehicles, tech experts believe.
Taiwan Semiconductor Manufacturing Co. said in an April 1 legal notice to the
Taipei stock exchange that it would use the money over three years on “leading
technology” for manufacturing and R&D to “answer demands from the market.” The
notice specifically cites demand for chips used in 5G-enabled and
That amount would set a dollar-value record for the company, which is better
known as TSMC, said Brady Wang, an analyst in Taipei with the market
intelligence firm Counterpoint Research.
TSMC’s investment will ease “anxiety” among clients worried about semiconductor
supply-chain instability caused in part by Sino-U.S. trade tension, said Kent
Chong, managing director of professional services firm PwC Legal in Taipei. Its
clients include multiple American hardware developers including Apple.
“Overall, it would indeed increase capacity, without any question,” Chong said.
American clients hope to source chips in the United States, he added. The
company headquartered southwest of Taipei is already planning to open a $12
billion plant in the U.S. state of Arizona. “TSMC is obviously the forefront
runner in bringing the whole supply chain to the U.S.,” Chong said.
TSMC said in its stock market filing it is “working closely with our customers
to address their needs in a sustainable manner.”
Analysts caution, though, that the ever-growing demand for chips paired with the
lag time in building new production plants will extend the shortage for years,
despite TSMC’s investment.
“You can throw a lot of money at it, but it’s not going to solve the problem,”
said Sean Su, an independent political and technology consultant in Taipei.
He pointed to popularity of home-use devices during the pandemic and a possible
long-term reliance on this technology in “hybrid” online-offline economy after
“Demand is off the ceiling,” Su said. “People want smartphones. People want this
and that more than ever. People want tablets all of a sudden. Every single child
in the house now needs a computer instead of sharing it.”
Remote study and telework, two trends that emerged during the 2020 coronavirus
outbreak, particularly raised demand last year for chips that run high-speed
notebook PCs. That trend is piggybacking on prepandemic demand for 5G
smartphones and new devices that run on artificial intelligence.
Automakers joined the mix, too, last year as they placed orders for automated
vehicles and electric cars. Because of the current chip shortage, they must wait
until at least early 2022 as production capacity is now “fully loaded,” said Wen
Liu, industry analyst with the Taipei-based Market Intelligence & Consulting
Feeling an additional pinch
World demand for chips should increase from $450 billion last year to about $600
billion in 2024, market research firm Gartner says. Industry revenue had already
grown 5.4% from 2019 to 2020, according to fellow market research company IDC.
TSMC and South Korean technology giant Samsung are the biggest chipmakers today
and make the highest-grade chips.
Chinese semiconductor clients will feel an additional pinch because of curbs
introduced by former U.S. President Donald Trump’s administration, Su said. The
Trump administration barred companies, including those based offshore, from
working with a list of Chinese firms considered national security risks.
“They will be [affected in China] due to trade embargoes as is,” Su said. “Every
year, companies fight over limited batches of top-end processors.”
chip buyers include developers of three of the world’s five biggest smartphone
brands by market share in late 2020.
Most of the world’s chipmakers, such as the growing China-based Semiconductor
Manufacturing International Corp., lag in the equipment and knowhow to make
chips that run fast on low power, tech analysts believe. TSMC’s investment will
help it stay ahead of any up-and-coming peers, Wang said.
“This is actually because [TSMC] saw a new opportunity, which would mainly be in
5G or high-performance PCs or demands for other digitization needs as that’s the
demand following COVID-19,” Wang said. TSMC itself probably does not expect the
planned $100 billion outlay to ease today’s chip shortage, he said.
The company says in its stock exchange notice that “multiyear mega-trends...are
expected to fuel strong demand for our semiconductor technologies in the next
several years,” while the pandemic “accelerates digitalization in every aspect.”