TSMC to Build Chip Factory in Japan as It Faces Surging Demand

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With a historic semiconductor crisis looming, chip makers around the world are rushing to increase production capacity

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Meanwhile, TSMC expects its production capacity to remain tight until 2022, Chief Executive Sisi Wei said.

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“We believe that expanding our global manufacturing footprint will enable us to better meet the needs of our customers,” Mr. Wei said in an earnings call on Thursday, without giving further details about the new facility.

Earlier this year, TSMC pledged to spend $100 billion over three years on developing new technologies and features. The company is also building a $12 billion chip factory in Arizona and expanding production capacity in Nanjing, China. The company did not disclose the cost of the new Japan plant, but said it would be on top of a $100 billion pledge.

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Other chip makers – including Intel Corporation

, samsung electronics Co.

, and GlobalFoundries Inc.— have announced ambitious capital investment plans this year as well.

TSMC said the new factory will focus on less advanced chips, which are commonly used in components such as autos and sensors. Japan’s Sony Group Corporation

, which supplies Apple Inc.

According to a person familiar with the matter, iPhones with image sensors used in the cameras, will take part in the new plant. TSMC declined to comment.

Mr. Wei said the company did not rule out building more facilities in places like Europe.

TSMC’s quarterly revenue and net profit both reached records for the quarter ended September 30, driven by strong chip demand. Net profit for the quarter rose 14% to the equivalent of $5.57 billion from a year ago, while revenue rose 16% to equal $14.78 billion.

The global chip shortage has had far-reaching effects on manufacturing and economic growth. A lack of semiconductors needed for air conditioning, engine control and other functions has forced some of the world’s biggest auto makers to close factories and cut production. It has caused billions of dollars in revenue for car companies, with sales plummeting despite strong demand.

TSMC has emerged as a significant player during market turmoil, increasing production of older-technology chips used in cars. The company has said that it is on track to increase the production of auto chips by 60% this year as compared to last year.

“We are doing our best to provide our automotive customers with the support they need. However, we cannot solve the supply challenge of the entire industry,” Mr. Wei said. The company accounts for about 15% of the global auto-chips market, he said.

The company’s third-quarter revenue from auto chips increased 5% from the previous quarter, but accounted for 4% of total sales. Smartphone chips accounted for 44% of its total sales.

Auto makers are facing prolonged pain, as wait times for semiconductors have lengthened and prices soared. Chip shortages have also spread to other industries, disrupting production items including smartphones, home appliances and medical devices, and driving up the prices of end products.

Businesshala reported that TSMC recently raised prices for its customers by up to 20%.

Industry analysts say TSMC, based in Hsinchu, Taiwan, produces almost all of the world’s most advanced chips on the island. The world’s reliance on Taiwan for advanced chip manufacturing, coupled with rising political tensions between the self-governing island and China, has raised concerns about the security of the semiconductor supply chain.

Earlier this month, Taiwan’s defense minister said it was facing its most serious military challenge from China in decades, as sorties by Chinese planes increased near the island.

Manufacturing of advanced chips contributed more than half of TSMC’s revenue for the quarter. Research firm Trendforce said the company typically accounts for 55% of the global foundry market by revenue.

Stephanie Yang at [email protected] and Yang Jie at [email protected]

.

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