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TSMC lifts targets after warning Chip Crunch could land in 2022

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(Bloomberg) – Taiwan Semiconductor Manufacturing Co. warned that a global shortage of semiconductors in a variety of industries, from automaking to consumer electronics, could extend into 2022, prompting the spindle chipmaker to lift spending and growth targets for this year.

The world’s largest chip maker said on Thursday that its automotive customers can expect chip shortages to ease next quarter, driving some of the supply disruptions affecting General Motors Co. and Ford Motor Co. forced to limit production. But general shortages of critical semiconductors will continue in 2021 and possibly into next year, Chief Executive Officer CC Wei told analysts in a conference call.

TSMC now expects to invest approximately $ 30 billion in capacity expansions and upgrades this year, after spending $ 8.8 billion in the first three months, Chief Financial Officer Wendell Huang said. The company had previously forecasted spending of as much as $ 28 billion. June quarter revenue could be between $ 12.9 billion and $ 13.2 billion, which is higher than the $ 12.8 billion average that analysts see, although the gross margin target of 49.5% to 51.5% was below expectations. Full-year sales could increase by 20% in dollars, ahead of the mid-teen growth predicted in January.

“We see that demand remains high,” said Wei. “I hope that in 2023 we can offer more capacity to support our customers. At that point, we’ll see the tightness of the supply chain release a bit. “

TSMC joins a growing number of industry giants from Continental AG to Renesas Electronics Corp. and Foxconn Technology Group who warned of longer-than-expected shortages thanks to unprecedented demand for everything from cars to game consoles and mobile devices. While Taiwan’s largest chip maker has kept its factories “over 100% utilized,” the company does not have enough capacity to satisfy all of its customers and has pledged to invest $ 100 billion over the next three years to expand.

Read more: Watch a chip shortage snarled everything from phones to cars

Shortages of semiconductors run through the global economy. Car manufacturers such as Ford, Nissan Motor Co. and Volkswagen AG have already scaled back production, leading to estimates of more than $ 60 billion in lost revenue for the industry this year. The situation is likely to get worse before it gets better: A rare winter storm in Texas has shut down parts of US manufacturing, while a fire at a major plant in Japan will shut the plant down for a month. Rival chipmaker Samsung Electronics Co. warned of a “serious imbalance” in the industry.

With major US automakers and other gadget suppliers facing a long-term chip shortage, US President Joe Biden has proposed $ 50 billion to boost research and manufacturing of semiconductors at home. The initiative could support TSMC’s plan to build a state-of-the-art factory in Arizona this year that could cost $ 12 billion.

TSMC is “happy” to support chip production in the US, although research and development and most of the manufacturing will remain in Taiwan, executives said Thursday. They reiterated that construction of their Arizona plant will begin this year.

Read more: Why $ 1 chip shortages sparked a crisis in the global economy

January-March net income increased 19% to NT $ 139.7 billion ($ 4.9 billion), surpassing analyst average estimate of NT $ 136.2 billion, supported by high performance demand computing (HPC) equipment and a milder seasonal effect on smartphone demand. Gross margin for the quarter decreased from 54% in the previous three months to 52.4%, in part due to relatively lower occupancy rates and exchange rate movements. First quarter sales were up 17% to NT $ 362.4 billion, according to a company statement last week.

The company said Thursday it now expects to be able to hit the higher end of its compound annual growth rate target of 10% to 15% for the five years to 2025, citing its capital expenditures.

TSMC’s statement that the chip crisis could spill over into 2022 will allay concerns that chip demand may decline due to overbooking later this year and will further bolster investor confidence in the overall long-term demand for semiconductors, said Elsa Cheng, an analyst at GF. Effects.

TSMC’s shares have more than doubled in the past year. The stock rose 1.1% on Thursday, before the company reported earnings.

TSMC’s most advanced technologies accounted for nearly half of sales in the March quarter, with 5 nanometer and 7 nanometer processes contributing 14% and 35% of sales, respectively. By business segment, its smartphone business accounted for about 45% of sales, while HPC rose to more than a third, reflecting the continued demand for devices and Internet servers, even as economies begin to emerge from the pandemic.

“We are seeing stronger engagement with more customers on 5nm and 3nm, in fact the engagement is so strong that we really need to prepare the capacity for it,” Wei said. Smartphones and HPC will be the main drivers of demand for 5nm, which will contribute about 20% of wafer revenues this year.

TSMC is on fire. Watch out for the flames: Tim Culpan

(Updates with comments from the company)

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