A shortage of semiconductors has stalled manufacturing activity in the auto industry
Shortages of semiconductors used in products including home appliances and smartphones have disrupted manufacturing activity, particularly in the auto industry. That reduction should be greatly reduced for TSMC customers in the current quarter, Mr. Wei said.
Global auto makers in the US and Europe have pressured TSMC to prioritize their orders, forcing the chipmaker to negotiate with other customers to free up manufacturing capacity for auto chips.
Second-quarter revenue from auto chips increased 12%, but was just 4% of total sales. Meanwhile, revenue from smartphone chips declined 3%, which accounts for 42% of total sales. Mr. Wei said he expects demand for the chip from the auto sector to increase as more cars go electric and automatic.
The company is increasing production of semiconductors used in cars and other products that require less advanced technology by expanding capacity at plants such as the Chinese city of Nanjing. Officials said Thursday that the company is also in talks to build a new facility in Japan.
TSMC has pledged to spend $100 billion on ramping up production over the next few years to meet growing demand for semiconductors. The COVID-19 pandemic accelerated this trend by popularizing electronics for remote work.
Taiwan-based company Hsinchu has begun construction on a $12 billion manufacturing facility in Arizona, where officials said more expansion is possible.
The CEO, Mr. Wei, said he expects the overall contract chip-making industry to grow 20% in 2021 and is confident TSMC can outperform that forecast.
The company’s second-quarter net profit jumped 11% compared to a year ago to US$4.8 billion, or the equivalent of 134.36 billion New Taiwan dollars. Revenue rose 20% to US$13.3 billion in the second quarter, and operating margin fell 3.1 percentage points to 39.1%.
Investments in new facilities and advanced technology, coupled with more expensive raw materials, will increase costs for TSMC’s customers, Mr. Wei said.
The company said revenue from customers in North America accounted for 64% of its second quarter revenue, down from 67% in the first quarter, while revenue from China accounted for 11% of the total, up from 6% in the previous quarter. . With high-performance computing as the key driver.
“China remains a very strong and growing market. We expect our trade from China to increase across all market segments,” Mr. Wei said.
Rising tensions between the US and China have raised concerns about how the military conflict and Chinese aggression in Taiwan could affect the semiconductor industry.
While geopolitical risk is an issue facing many companies, TSMC President Mark Liu said he remains optimistic that Taiwan will not be affected, given its importance to the global supply chain.
“No one wants to disrupt it,” said Mr. Liu.
—Kosaku Narioka contributed to this article.