TSMC this week warned the ongoing global shortage of semiconductor supplies will probably continue throughout this year and next.
CEO C.C Wei confirmed to analysts on the chip manufacturing giant's financial earnings call that it will invest $100bn in building more manufacturing plants and hiring thousands of engineers to step up production and capacity rates, though it's going to take time.
"To install the capacity, it won't be available until 2023," Wei said. "This year and next year I still expect capacity to tighten more. In 2023, I hope that we can offer more capacity to support our customers, and in time start to see the supply chain's tightening released a little bit."
Here's how the semiconductor shortage played out: last year, fabrication plants – some of which were temporarily closed during the early stages of the pandemic and already at capacity due to the demand for cloud and AI systems – were flooded with orders for components for PCs, gaming, remote servers, phones, and other devices as millions shifted to working or studying at home.
And so essentially there are now three elements causing the drought: a lack of silicon wafers and chip packaging materials, and a lack of available fabrication plant capacity. Industries from healthcare to consumer electronics are feeling the crunch, though automakers – such as Ford and General Motors – have been hit hard. As the pandemic took off, car and truck sales imploded, and so vehicle assembly lines slowed and orders for electronics and other parts were put on hold. Now, things are picking up again but the chip fabs are busy churning out components for other industries, leaving automakers screwed.
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The problem is so bad that President Biden urged Congress to spend $50bn on American semiconductor R&D and manufacturing, and signed an executive order in February promising to review weaknesses in America's supply chains.
But shortages will continue in the near future, according to Wei. “Our customers are currently facing challenges from the industry wide semiconductor shortage, which is driven by both a structural increase in long-term demand as well as short-term imbalance in the supply chain,” he confirmed during the briefing.
Here’s a quick run down of TSMC's latest earnings from the first three months of 2021 [PDF]:
- Revenues were $12.9bn, an increase of 25.4 percent compared to the $10.3bn from a year ago. TSMC makes chips for Apple, AMD, Nvidia, and many others.
- Net income was $4.98bn, a jump of 19.4 per cent. The majority of TSMC’s income was driven by smartphones (45 per cent) and supercomputers (35 per cent).
- Gross margin percentage was 52.4 per cent, up 0.6 basis points from a year ago.
- GAAP earnings per share were $0.19, an increase of 19.4 per cent from the previous year.
Nearly 50 per cent of TSMC’s revenues came from its 7nm and 5nm process nodes. It expects demand for 5nm chips to increase by 20 per cent this year. Wei also said that the company is making progress on its 3nm process, and expects volume production to commence in 2022.
Although the automotive market only makes up about four per cent of the company’s sales, it’s an area that’s growing. Wei said supply for automakers was a “top priority.”
“We are working to relocate wafer capacity to support the worldwide automotive industry,” he added. ®
Global sales of semiconductor manufacturing equipment grew 19 per cent from $60bn in 2019 to a "new all-time high" of $71bn in 2020, according to industry body SEMI this week.
"Global sales of wafer processing equipment rose 19 per cent in 2020," the association added, "while other front-end segment sales grew 4 per cent. Assembly and packaging showed strong growth across all regions, resulting in a 34 per cent market increase in 2020, while total test equipment sales increased 20 per cent."