TSMC remains committed to expanding capacity, despite warnings of lower demand
TSMC is bullish about the future, but analysts are not so sure
Chip maker TSMC plans to invest up to $44 billion (£32 billion) this year to beef up chip manufacturing capacity, amid analyst warnings that the demand for technology gadgets could soften in near future.
In its latest earnings call, the Taiwanese chip giant said it intends to expand its foundry capacity by $40 billion (£29 billion) to $44 billion this year, up from a previous high of $30 billion (£22 billion) in 2021.
Between 70 and 80 per cent of that investment will go toward advanced process technologies, including the company's upcoming 2nm and 3nm manufacturing techniques.
Major chip makers have been investing heavily to increase capacity in recent years, as a pandemic-fuelled rise in demand for consumer electronics has led to severe semiconductor shortages.
TSMC, Samsung and Intel - three of the world's largest chip makers - accounted for nearly three-fifths of the $146 billion (£106 billion) spent by semiconductor companies last year to build new production capacity and develop new technologies, according to Gartner.
"Entering 2022, we expect the supply chain to maintain a higher level of inventory compared to the historical standard or level, given the industry's continued need to ensure supply security," said TSMC CEO C.C. Wei.
TSMC expects to see a structural growth in long-term semiconductor demand, underpinned by the industry megatrend of 5G and HPC-related applications.
"We also observe higher silicon content in many end devices, including automotive, PCs, servers, networking, and smartphones," Wei added.
For the three months ending in December, TSMC's net profit hit a new high of NT$166.2 billion (about £4.4 billion), up 16.4 per cent year-on-year.
Revenue increased by 21.2 per cent to a new high of NT$438.2 billion (about £11.5 billion).
Based on the current business outlook, TSMC management estimates sales for the first quarter of 2022 to be between $16.6 billion (£12.1 billion) and $17.2 billion (£12.5 billion).
Wei gave an update on the foundry's upcoming 3nm process node in southern Taiwan, which is expected to go into production in the second half of 2022.
The chip giant is also building a new fabrication unit in the US for 5nm production, the most advanced technology level currently in use.
TSMC's investment plans come amid analyst warnings that tech demand growth may slow, especially in the smartphone category that accounts for the majority of TSMC's revenues.
"2021 was definitely a very high point, even if we look at the past decade," Kristine Lau, associate at technology consultancy Third Bridge, told the Financial Times.
She added that recent lower forecasts for demand from Chinese smartphone makers this year would impact both MediaTek and TSMC, which supply most of these companies.
Last year, TSMC raised chip prices by as much as 20 per cent, to fund future capacity expansion in the face of the global shortage.
The firm has previously said that it plans to spend about $100 billion (£73 billion) in capital investments through 2023, including $12 billion (£8.7 billion) on a new manufacturing hub in Arizona. The company is also considering opening its first Japanese chip plant, in Kumamoto.