TSMC and Intel increase spending as demand for semiconductors soars


Taiwan Semiconductor Manufacturing Co. (TSMC) signage is displayed at the company’s headquarters in Hsinchu, Taiwan, Wednesday, June 5, 2019.

Ashley Po | Bloomberg via Getty Images

Semiconductor companies around the world are preparing to make major investments in their research and development facilities, in a bid to meet growing demand as the global chip shortage rages.

The world’s largest contract chipmaker, TSMC, has pledged to invest $100 billion over three years to ramp up production of its cutting-edge silicon wafers, which are used to make a variety of chips.

in January, it said its capital spending would increase by up to 47% in 2022, adding that it plans to spend between $40 billion and $44 billion this year, up from $30 billion last year.

The Taiwanese chip giant, headquartered in Hsinchu and with a market capitalization of nearly $600 billion, is building a $12 billion factory in Phoenix, Arizona, and another in Japan to boost capacity. It has several other manufacturing plants – also known as fabs – in development.

TSMC is certainly not the only chipmaker investing billions in high-tech fabs, which typically take three to four years to come online.

Rival Intel announced last March that it planned to spend $20 billion on two new chip factories in Arizona. Intel has had a presence in Arizona for over 40 years, and the state is home to a well-established semiconductor ecosystem. Other major chip companies in Arizona include On Semiconductor, NXP and Microchip.

Samsung, South Korea’s biggest company, gave no guidance for 2022, but last month the company revealed it had spent 90% of its $48.2 trillion annual capital expenditure won ($40.1 billion) in 2021 in the chip industry.

In 2021, semiconductor companies around the world spent $146 billion building new manufacturing capacity and research, according to research firm Gartner. TSMC, Samsung and Intel – three of the world’s largest chipmakers – accounted for 60% of the $146 billion.

“We see capital [expenditure] almost doubling in the 2021-2025 5-year period compared to the 2016-2020 period,” Peter Hanbury, semiconductor analyst at research firm Bain, told CNBC.

“This increase is due both to the increasing complexity of new cutting-edge technologies that involve more process steps to create a wafer and require more expensive tools, as well as a response to the shortage of chips, manufacturers increasing the capacity of many technologies.”

Many other big names in semiconductors — like Nvidia, AMD and Qualcomm — don’t need to spend such large sums because they’re “fabless,” Glenn O’Donnell, the firm’s director of research, told CNBC. of Forrester analysts.

“They design the chips and then contract with someone like TSMC to manufacture the chips,” he said.

Flea shortage continues

Despite the huge sums invested, the semiconductor industry still struggles to produce enough chips.

“We just can’t make enough chips to satisfy society’s greed for anything semiconductor-powered,” O’Donnell said.

The chips are used in everything from kettles and washing machines to headphones and fighter jet missile systems. Many products, such as cars, contain dozens of chips.

Some have speculated that there will be a “chip glut” once all the new factories produce more chips, but O’Donnell disagrees.

“The human race is addicted to technology,” he said. “Demand will continue to rise, not decline. In fact, I’m skeptical that all of this investment is enough.”

In the short term, Hanbury expects the recovery from the chip shortage to be very “unstable”, adding that a shortage in one area allows more different end products (like a PC) to be built.

“But then that increases the demand for all the other chips needed to make that end product,” he said. “It’s kind of like a ‘hit a mole’ problem.”

In the long term, Hanbury sees little risk of oversupply in the next two to three years as it will take some time to build the recently announced chip factories.

“However, we are watching for future oversupply,” he said, adding that more facilities are likely to be built once governments refine and finalize their incentive programs.

Some of the lesser-known chipmakers also plan to increase spending this year.

Infineon, Europe’s biggest chipmaker, headquartered in Munich, said on Wednesday it would spend an additional 2.4 billion euros ($2.7 billion) to expand operations to meet Requirement.

Meanwhile, French-Italian chipmaker ST Micro said last week that it plans to double its investment this year to $3.6 billion to meet demand. Last year, the Geneva-based company, whose main customers are electric car maker Tesla and iPhone maker Apple, spent $1.8 billion.

Several other companies in the semiconductor supply chain will benefit from the investments made by chipmakers.

“Watch companies like ASML, Applied Materials and Air Products,” O’Donnell said. “They’re the main suppliers to these chip-making facilities, so they’re about to take advantage of their own boom cycle.”

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