TSMC: Chip Sales Set to Rise, But Expansion Plans Face Hurdles

(Image credit: TSMC)

Taiwan Semiconductor Manufacturing Co. projects its revenue to grow by about 30% this year, a new all-time-high for the company. Demand for semiconductors continues to be strong despite macroeconomic challenges, so TSMC is confident of this year's results. TSMC's plans for its U.S. expansion are on-track, but the company is facing about higher-than expected costs. Meanwhile, the company does not have anything to announce in regards to its European fabs. 

TSMC's revenue for the first quarter of 2022 reached approximately $16.965 billion, up a whopping 35.5% year-over-year. The company's sales hit a record not only due to strong demand for its services (TSMC currently commands the lion's share of advanced chip production), and because the foundry increased its prices in late August by 10% on N5 and N7 nodes and by 20% on its N16 and thicker nodes for orders set to be delivered beginning December. TSMC already said back in April that its revenues in 2022 would increase by around 30% YoY, so at its annual meeting with shareholders the contract maker of chips reiterated its prediction. 

There are concerns about demand for chips from makers of consumer electronics due to high inflation. Megatrends like 5G, AI, high performance computing, and edge computing generate demand from businesses and the latter are now slowing their orders down. 

"The current inflation has no direct impact on the semiconductor industry as the demand drop is mainly for consumer devices like smartphones and PCs while EV demand is very strong and partially exceeds our supply capacity so we are making inventory adjustments," said Mark Liu, chairman of TSMC, at the event, reports Bloomberg. "Utilization rate is full for the rest of the year." 

To meet demand for chips, TSMC is building additional manufacturing capacity, including a fab in Arizona. That fab will be able to produce chips on TSMC's 5 nm-generation nodes, which includes N5, N5P, N4, N4P, and presumably N4X. The company has always envisioned the production facility as a multi-phase project, so when earlier this year it indicated that it planned to expand its capacity, it came as no surprise. 

But increasing equipment prices, supply chain difficulties, and hiring talent make TSMC's Arizona fab more expensive than initially anticipated, Liu said. The costs increases are manageable, and the facility will be built. 

"There is always a learning curve when building a plant in a new place," said Liu, reports Nikkei. "For a long time, these places have had fewer [chip] plants than in Taiwan, so the supply chain is less complete. However, I believe after we, Intel and Samsung all go there, the supply chain will become more competitive in the coming years." 

TSMC is committed to build new fabs outside of Taiwan, something that the company has not done in a while. But for now, the company has nothing to announce regarding its new fabs in Europe. The company has been evaluating Germany and some other countries as part of its expansion plan, but so far, the company has not came to any conclusion yet. 

"In Europe, we have relatively fewer customers, but we are still assessing and still do not have any concrete plans," said the chairman, reports Reuters.

Anton Shilov
Freelance News Writer

Anton Shilov is a Freelance News Writer at Tom’s Hardware US. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends.