There is currently a global chip shortage, large due to the pandemic, with consumers dramatically increasing demand for electronics, including laptops, gaming consoles and even home appliances, while production reduced due to the same reason. Another factor has been US sanctions against Chinese chip companies.
The shortage has led to some car companies delaying production, and even limits to smartphone sales, but now Taiwan Semiconductor Manufacturing Co. (TSMC) has revealed plans to address the shortage with an investment of $100 billion in new production facilities.
“We are seeing a structural and fundamental increase in underlying demand driven by key long-term growth megatrends including 5G and high-performance computing,” said C.C. Wei, TSMC’s CEO in a letter. Wei said their plants have been running at 100% utilization in the past 12 months and still it has not been able to catch up to the demand.
TSMC supplied big names such as Apple, Qualcomm and Nvidia.
The company will be building “greenfield” chip manufacturing plants and expanding existing fabs, and has already started to hire thousands of employees, acquired land and equipment and started construction of facilities in multiple sites globally.
TSMC has already started work on a $12 billion facility in Arizona and is expanding facilities in Taiwan and operating two plans in China. The expansion will roll out over a 3 year period.
“The increased capacity will improve supply certainty and help protect complex global supply chains that rely on semiconductors,” he said. “We ask for your patience as we expedite the building of new fabs and capacity.”
All this investment will come at a cost to customers, but Wei said it was the least disruptive and sustainable way out of the shortage.
“We believe that this modest action is the least disruptive option to supply chains so that TSMC can deliver our mission of providing leading semiconductor technologies and manufacturing capability to you in a sustainable manner,” Wei said.
TSMC will not be dropping prices in December as chip yields improve, as is the tradition of the company,
Wei told clients that TSMC will “suspend wafer price reductions starting December 31” this year, for four quarters and asked clients to accept higher prices as it ramps up investment to deal with a “structural and fundamental increase” in chip demand.
The end result could be an increase in prices for consumers, but TSMC may content with increased competition and a glut in capacity in the near future as companies such as Intel also increase investment and ramp up production. Intel has re-entered the contract manufacturing market and has announced a $20 billion investment between now and 2024 to build two new chip plants, also in Arizona.