TSMC notes that the global chip crisis could be subsiding

TSMC's headquarters, seen here, is located in Hsinchu, Taiwan.
Enlarge / TSMC’s headquarters, seen here, is located in Hsinchu, Taiwan.

Automakers can expect a sharp rebound in chip supply in the coming weeks, Taiwan Semiconductor Manufacturing Company (TSMC) said, indicating that the global shortage may have passed its most crippling stage.

In the first six months of 2021, TSMC increased its production of microcontrol units, a major component used for automotive electronics, by 30 percent compared to the same period last year, the largest maker of microcontrollers told investors. chips for the world’s contract on an earnings call on Thursday. MCU production is expected to be 60 percent higher for the full year than in 2020, he added.

“By taking such actions, we expect the shortage to be greatly reduced for TSMC customers starting this quarter,” said CC Wei, TSMC CEO.

TSMC’s announcement follows more than nine months of severe chip shortages, which disrupted global auto production. The crisis began after automakers withdrew orders for chips last fall, leaving them without supplies when demand spiked weeks later.

Analysts have recently raised their outlook for the supply of auto chips.

IHS Markit said in a note in late June that it expected the disruption to recede in the third quarter. “We expect an improvement over Q1 or Q2 because the situation is better understood and great efforts are being made to improve visibility within a very complex supply chain,” he wrote.

“We see evidence of this in some of the more relaxed announcements coming from General Motors that began operations earlier than initially planned and in Toyota’s continued commitment to its planning.”

JPMorgan analysts estimated that global automakers’ production cuts related to semiconductor shortages would drop to 399,000 vehicles in the third quarter compared to 1.9 million during the second quarter.

In a move that will also boost confidence in long-term security of supply, TSMC said it was ready to continue investing in mature production technology, on which supplies of auto chips primarily depend.

“Our strategy most recently in mature nodes is to work more closely with our clients to create specialized solutions; we expect this structural demand to continue, “said Mark Liu, president of TSMC. “We will focus our investment on the specialty. For all-new manufacturing expansion, we don’t rule it out, as long as demand can justify it. “

United Microelectronics Corporation, TSMC’s smaller Taiwanese rival, announced earlier this year a significant expansion of its manufacturing capacity to 28 nanometers, one of the most important nodes for the production of automotive chips.

TSMC’s willingness to reinvest in older technologies, a departure from its previous practice, is part of a broader strategic fit. Liu also announced that the company was ready to invest in more new manufacturing plants, or factories, in countries other than Taiwan.

“There are several projects still in planning,” Liu said, adding that investment in any of them would add to the $ 100 billion in capital expenditures that TSMC has earmarked for the next three years.

The company said it would not rule out expanding its manufacturing base in Arizona beyond the $ 12 billion factory that is due to begin production in 2024. TSMC also announced that it is doing due diligence on a proposal to build a specialty semiconductor factory. in Japan, a country that it had previously only considered for research and development.

Liu said that while TSMC would continue its policy of starting state-of-the-art production in Taiwan and maintaining R&D there, the need for security of the semiconductor infrastructure necessitated a more diverse manufacturing footprint “to sustain and enhance our competitive advantage and better serve our customers in the new geopolitical environment. “

TSMC on Thursday reported net earnings of NT $ 134.4 billion (US $ 4.8 billion) for the second quarter, an increase of 11.2 percent year-on-year. It forecast revenue to grow 21-23% in the third quarter, a slight acceleration from the second quarter.

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