TSMC says fixing global auto chip drought is a priority


Taiwan Semiconductor Manufacturing Company said rectifying a shortage of automotive chips was a “priority”, as the world’s largest contract chipmaker reaped a quarterly demand boost from 5G smartphones.

The pledge on Thursday came after Volkswagen last month warned that a lack of car chips in the Chinese market could interrupt production at the German automaker. Honda said last week it would temporarily close a UK plant due to shortages.

“The shortage in automotive supply has become more obvious. In TSMC, this is our top priority,” said CC Wei, chief executive, whose group also makes chips for leading electronics brands including Apple.

“The automotive industry needs a lot of semiconductor components . . . such as mature technology for sensors and power management. We are working with customers to mitigate the shortage impact,” he added.

Mr Wei explained that an increase in demand from carmakers for chips in late 2020 had been difficult to meet, given that TSMC’s supply had already been squeezed by strong appetite earlier in the year from other manufacturers.

TSMC’s fourth-quarter revenue increased 14 per cent year-on-year to NT$361bn ($12.7bn), the company said on Thursday, meeting the top end of its own estimates. Net income rose 23 per cent year-on-year to NT$143bn.

The group’s revenues in 2020 were boosted by demand for smartphones and supercomputers, the company said, as well as bulk buying of chips by customers concerned about the coronavirus pandemic disrupting supply chains.

TSMC, which supplies half of the world’s foundry market, is closely watched by investors as an indicator of global demand for chips. Its New York-listed shares have doubled over the past year.

“The world needs advanced silicon and only TSMC has that,” wrote Bernstein analyst Mark Li in a note on Tuesday.

However, TSMC has been affected by the US push to isolate Chinese telecoms group Huawei. In May, Washington tightened sanctions to stop global suppliers, including TSMC, from selling certain chips to Huawei. The Chinese company had accounted for about 10 per cent of TSMC’s revenue.

TSMC said it expected its revenue growth to fall to the “mid-teens” in 2021, after it jumped by 25 per cent last year. The company expects revenues in the first quarter of 2021 to be little changed at $12.7bn-$13bn.

The company raised forecasts for its capital expenditure to $25bn-$28bn for this year, up from $17bn in 2020.

Analysts at investment bank Credit Suisse wrote that TSMC’s revenue growth in 2021-22 would be supported by demand for 5G-enabled smartphones, as well as more orders from Apple. TSMC is starting to fabricate Apple’s newest generation of Mac chips, after the US tech group ditched its previous partner Intel.

Intel’s declining competitiveness in the global foundry market is also a longer-term boost for TSMC. Bernstein’s Mr Li expects Intel, which designs chips as well as manufacturing them, to outsource some of its production to TSMC in 2023. That could add another 5-10 per cent to TSMC’s revenues, he added.

Asked by analysts whether its increase in capital expenditure was linked to Intel’s outsourcing, the company declined to comment.

Additional reporting by Qianer Liu in Shenzhen


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