Amid a major die shortage, the world’s leading contract foundry TSMC announced that it would spend $ 100 billion over the next three years to increase the capacity of its manufacturing facilities. The Wall Street Journal says so much of an investment is not only a record for the company, but also a record for the industry. TSMC uses the chip designs presented to it by major technology companies such as Apple (the foundry’s largest customer), MediaTek, Intel, AMD, and others.
TSMC is struggling to meet its customers’ chip requirements
With the increasing demand for 5G chips coupled with the global chip scarcity, TSMC has not been able to produce enough components to meet their customers’ demands. In a letter to his customers that was read by the diary, CEO CC Wei wrote that despite using its factories at over 100% rate, TSMC was unable to meet its customers’ demands. The executive said in the letter that the company has already hired thousands of new employees and plans to expand the capacity of its manufacturing facilities by building new factories.
TSMC plans to spend $ 100 billion on the capacity increase over the next three years
Pierre Ferragu, an analyst at New Street Research, notes that the $ 100 billion TSMC plans to spend over three years is double what it has been in the past three years. On Thursday, the company explained its reason for doubling its spending by saying, “TSMC works closely with our customers to meet their needs in a sustainable manner.” Earlier this year, we told you that the foundry’s investments would be in the range of $ 25 billion to $ 28 billion this year, especially if the company is ready to ship 3nm chips next year.
Last year TSMC launched chips made with the 5nm process node, starting with the Apple A14 Bionic. The smaller the process node, the greater the number of transistors that can fit in a square mm, making the components more powerful and energy efficient. Building new lines to make 3 nm chips is a very expensive task. Just last November, TSMC completed the plant structure for its 3 nm factory in the Southern Taiwan Science Park (STSP).
The competition also gives out cash by the handful. Intel recently announced that it will spend $ 20 billion to build two new chip factories in the United States starting in 2024. Intel, which once bragged about having a three-year lead over its competitors, is now on their newest chips when it comes to foundries like TSMC and Samsung’s process node. Samsung, the world’s second largest contract foundry, plans to spend $ 116 billion by 2030 to diversify chip production. Globalfoundries, a contract foundry in the United States, says it will double its capital investment to increase capacity.
For US semiconductor suppliers, TSMC is building a chip factory in Arizona that will cost the company $ 12 billion. The factory should be up and running at 20,000 12-inch wafers per month in 2024. The company’s US plants produce 5 nm chips. The problem is, by 2024, state-of-the-art chips will be made using the 3nm process node, with 2nm testing being done. Intel’s two upcoming US factories will also be built in Arizona.
Reducing US dependence on Asian chipmakers has been a goal of the last two governments in the states. With this in mind, President Joe Biden’s $ 2.3 trillion infrastructure plan provides $ 50 billion for the semiconductor industry.
Chip shortages are serious business, so foundries are willing to spend the big bucks building new manufacturing facilities. Xiaomi President Wang Xiang warned against this at the end of last month Chip shortages could lead the company to raise prices for its phones. Given the company is known as a value maker, the shortage is having an overwhelming impact on the industry.