Apple Supplier TSMC Sees Global Chip Shortage Lasting Into 2022

Taiwan Semiconductor Manufacturing Co (TSMC) said on Thursday it is doing all it can to increase productivity and alleviate a worldwide chip shortage, but that tight supplies will likely continue into next year.

The world's biggest contract chipmaker said it is expanding capacity and working to keep pricing reasonable.

"We have acquired land and equipment, and started the construction of new facilities. We are hiring thousands of employees and expanding our capacity at multiple sites," Chief Executive Officer C. C. Wei told an online earnings briefing.

The chip shortage is going to take "a couple of years" to abate, Intel CEO Pat Gelsinger told the Washington Post on Wednesday.

TSMC's comments come after the firm reported a 19.4 percent rise in first-quarter profit, beating market expectations, on strong chip demand amid a global shift to home working.

TSMC, whose clients include Apple and Qualcomm, had already flagged "multiple years of growth opportunities" as the COVID-19 pandemic fuelled demand for advanced chips to power devices such as smartphones and laptops.

Its business was boosted by the chip shortage that initially forced automakers to cut production, but is now also hurting manufacturers of smartphones, laptops, and even appliances.

On Thursday, TSMC said it expects the chip shortage for its auto clients to be greatly reduced from the next quarter.

TSMC's net profit for January-March hit $4.93 billion (roughly Rs.36,800 crores), versus the $4.72 billion (roughly Rs. 35,230 crores) average of 22 analyst estimates compiled by Refinitiv.

Revenue rose 25.4 percent to a record $12.92 billion (roughly Rs. 96,440 crores), in line with the company's earlier estimated range of $12.7 billion (roughly Rs. 94,800 crores) to $13 billion (roughly Rs. 97,000 crores).

The firm forecast second-quarter revenue would be in a range of $12.9 billion (roughly Rs. 96,300 crores) to $13.2 billion (roughly Rs. 98,500 crores), compared with $10.38 billion (roughly Rs. 77,500 crores) in the same period a year earlier. It also lifted its revenue growth forecast for 2021 to about 20 percent, versus an earlier forecast of a mid-teens percentage.

TSMC said this month it plans to invest $100 billion (roughly Rs. 7.46 lakh crores) over the next three years to increase capacity at its plants, days after Intel Corp announced a $20 billion(1.49 lakh crores) plan to expand its advanced chip-making capacity.

Wei said the massive investment plan was driven by "stronger engagement with more customers" on the company's most advanced 5-nanometer node technology as well as its upcoming 3-nanometer node, which is scheduled to enter trial production later this year.

The company also increased capital spending on the production and development of advanced chips to about $30 billion this year, up from a range of $25 billion (roughly Rs.1.87 lakh crores) to $28 billion (roughly Rs. 2 lakh crores) it forecast in January.

Wei said TSMC is seeing its clients preparing for "a higher level of inventory" to ensure supply stability due to uncertainties from geopolitics and the pandemic. As a result, he said, the company's capacity will remain "tight" throughout the year.

Analysts are bullish about the company's massive expansion plan, expecting global demand for advanced chips to surge as fifth-generation telecommunications (5G) technology and artificial intelligence applications are adopted more widely.

TSMC shares have risen about 16 percent so far this year and have more than doubled over the past year, giving TSMC a market value of $558 billion (roughly Rs. 41 lakh crores), more than twice that of Intel's and higher than that of South Korean technology giant Samsung Electronics Co Ltd.

The stock rose 1.14 percent on Thursday, compared with 1.25 percent for the benchmark index.

Why did LG give up on its smartphone business? We discussed this on Orbital, the Gadgets 360 podcast. Later (starting at 22:00), we talk about the new co-op RPG shooter Outriders. Orbital is available on Apple Podcasts, Google Podcasts, Spotify, and wherever you get your podcasts.