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TSMC allocates a third more on capital spending in 2022 – that's a fab-ulous $44bn on new plants and other things

Execs foresee fewer kinks in the supply chain this year? Perhaps

Taiwan Semiconductor Manufacturing Company (TSMC) will hike capital spending by a nearly third in 2022 to build out production capacity in the expectation that demand for chips keeps flooding in.

The financial outlay is estimated to jump to as much as $44bn this year, up from $30bn in the previous fiscal, and was outlined today when the company reported results for its calendar Q4 with revenues up 5.8 per cent year-on-year to $15.74bn and net profit up 16.4 per cent to $6bn.

The top line was driven by demand for semiconductors manufactured with TSMC's 5nm process technology. This contributed to 23 per cent of TSMC's total wafer revenue in the quarter, while those made using its 7nm process accounted for a further 27 per cent. These advanced technologies therefore made up half of TSMC's total wafer revenue during the quarter.

Chips used in smartphones accounted for 44 per cent of Q4 sales, HPC 37 per cent, IoT 9 per cent, Automotive 4 per cent, and Digital Consumer Electronics some 3 per cent.

For the whole year, revenue was up 24.9 per cent to $56.82bn

TSMC has been one of the beneficiaries of the soaring demand for chips that has led to supply chain issues for many across the IT industry and even affected others such as the automotive sector.

Looking ahead in 2022, TSMC expects high demand to continue, and estimates revenues for this first quarter will increase again to somewhere in the range of $16.6bn to $17.2bn.

TSMC said it expects big things from the high-performance computing sector. Previously the company suggested it would be ready to start production of 3nm silicon this year, and expressed hopes this would lead to HPC turning into TSMC's largest product segment.

"Moving into first quarter 2022, we expect our business to be supported by HPC-related demand, continued recovery in the automotive segment, and a milder smartphone seasonality than in recent years," VP and chief financial officer Wendell Huang said.

TSMC will expand capacity and build new fabrication plants to meet fiscal targets and support new technologies such as 3nm.

Between 70 and 80 per cent of this budget will be allocated for advanced process technologies, including 2nm, 3nm, 5nm and 7nm, Huang said. About 10 per cent will go on advanced packaging and mask making, and 10 to 20 per cent will be spent on unspecified specialty technologies.

On a conference call with analysts, chief exec C C Wei said he expects the supply chain to maintain a greater-than-normal level of inventory during 2022, given the industry's continued need to ensure supply.

As for the long-term growth outlook and profitability, Wei said TSMC is entering a period of higher structural growth as technology becomes more pervasive in people's lives and digital transformation accelerates.

"We expect our long-term revenue to be between 15 per cent and 20 per cent CAGR over the next several years in US dollar terms," he said. This will be fuelled by four growth platforms – smartphone, HPC, IoT, and automotive.

On 3nm technology, Wei said that it was on track for production to start in the second half of 2022.

"N3 technology will use FinFET transistor structure to deliver the best technology maturity, performance and cost for our customers," he said, adding that TSMC is seeing a high level of customer engagement and expects to see more new tape-outs for N3 during the first year compared with N5 (5nm). ®

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