Taiwan Semiconductor Manufacturing Company headquarters, in Hsinchu, Taiwan. Picture: REUTERS/ANN WANG
Taiwan Semiconductor Manufacturing Company headquarters, in Hsinchu, Taiwan. Picture: REUTERS/ANN WANG

Taiwan Semiconductor Manufacturing Company (TSMC) expects sales to rise more than 20% in 2021, affirming its crucial role in helping alleviate a global chip shortage that has walloped carmakers and other industries.

TSMC, chipmaker to Apple and a key partner to many of the world’s biggest carmakers, expects semiconductor supply to remain tight into 2022, CEO CC Wei said on Thursday. The company will ramp up production of microcontrollers by close to 60% in 2021, which will help greatly to boost supplies for its vehicle manufacturing clients starting in the current quarter. Executives also for the first time confirmed the company was weighing plans for a fabrication plant in Japan.

Revenue in the current quarter may rise to between $14.6bn and $14.9bn, in line with the $14.7bn average of analyst estimates. TSMC’s 2021 sales outlook marked a slight increase from a previous forecast for 20% growth in full-year sales.

TSMC, the world’s most advanced manufacturer of semiconductors, has played an increasingly prominent political role over the past year, negotiating with governments and major corporations desperate for the chips needed to power businesses and economies. The Taiwanese company’s executives, normally more comfortable talking technical specifications and technology road maps, addressed questions on Thursday about how they’ll deal with Chinese tensions.

Taiwan’s grip on the semiconductor business — despite being under constant threat of invasion by Beijing — represents a choke point in the global supply chain that’s giving new urgency to plans from Tokyo to Washington and Beijing to increase self-reliance.

“Everybody wants to have a peaceful Taiwan Strait,” chair Mark Liu said. “No-one wants to disrupt” the semiconductor supply chain in Taiwan.

While an ongoing semiconductor shortage has hampered the global economic recovery from Covid-19, suppliers such as TSMC, the world’s largest contract chipmaker, are among beneficiaries as they race to fulfil orders. The Taiwanese company is also likely to get a lift from plans by Apple, its largest customer, to ready 90-million units of upgraded iPhones for the second half of 2021.

In early July, Daimler and Jaguar Land Rover warned that sales will be further curtailed by the persistent chip shortage, with the latter saying deliveries in the second quarter will be 50% worse than initially thought. The UK economy’s growth slowed to 0.8% in May, partly due to a 16.4% slump in the production of transport equipment triggered by a lack of semiconductors.

TSMC revenue from automotive clients increased 12% from the first quarter, while high-performance computing climbed by a similar magnitude. Sales to smartphone clients, the biggest chunk of its revenue, eased 3% in the seasonally slower second quarter.

“TSMC has actively taken steps throughout the first half of this year and will continue to do so through the rest of the year to address the chip supply challenges” for carmakers, Wei said. “We have worked dynamically with other customers to reallocate our wafer capacity to support the worldwide automotive industry.”

Net income for the quarter ended in June rose 11% to NT$134.4bn ($4.8bn), slightly below analyst estimates. Gross margin for the second quarter was 50%, below the roughly 51% average predicted by analysts, in part because of an unfavourable exchange rate. For the September quarter, TSMC forecast gross margin of 49.5% to 51.5%. Analysts had seen 51.5%, according to estimates compiled by Bloomberg. TSMC fell 1.5% in premarket US trading.

Meanwhile, in early June, a cluster of Covid-19 infections at a factory in central Taiwan forced King Yuan Electronics, one of the world’s leading chip-testing service providers, to shut operations temporarily. That led to minor disruptions in the Taiwanese semiconductor supply chain which many around the world rely on. TSMC said on Monday three of its employees were confirmed to have been infected, though it doesn’t see any affect on operations.

The CEO on Thursday revealed TSMC is currently conducting “due diligence” on whether to build a fab in Japan, which would mark a strategically important geographic expansion for the chipmaker. Any Japan fab will be for “specialty technology” — a term that usually refers to mature node chips that serve specific or niche markets, Liu said, adding that there is no final decision yet.

“If TSMC builds a fab in Japan, it is likely to build a modest mature node fab to better serve its automotive and industrial customers there,” said Jeff Pu, an analyst with Haitong International Securities Group. “By setting up a fab in Japan, TSMC will also have the opportunity to better explore non-US equipment for future development.”

TSMC currently produces its most advanced chips in Taiwan, though it has a facility in Nanjing and is building a $12bn plant in Arizona.

Bloomberg News. More stories like this are available on bloomberg.com


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