Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s biggest contract chipmaker, yesterday said it would again budget more than US$40 billion for capital expenditure next year to expand capacity, meet customer demand and fuel revenue growth.
The chipmaker this year budgeted between US$40 billion and US$44 billion for capital expenditure, mainly to expand its advanced process technology capacity, including for 3-nanometer, 5-nanometer, 7-nanometer and next-generation 2-nanometer technology.
Over the past three years, TSMC spent US$62 billion on capital expenditure, which helped drive revenue growth of 48 percent over the period, the chipmaker said.
Photo: Grace Hung, Taipei Times
This year, revenue is expected to increase 30 percent annually, TSMC chairman Mark Liu (劉德音) told the company’s annual general meeting in Hsinchu yesterday.
“TSMC is entering a structural and high-growth phase. During the year before last year, [revenue] grew 30 percent [annually]. The growth was 20 percent last year. This year, the growth will be 30 percent. Looking forward, we see this high growth will continue, so we have to expand capital spending,” Liu said.
To fund its massive investment, TSMC held back on plans to boost cash dividends after some shareholders requested that the chipmaker pay higher dividends, Liu said.
TSMC‘s board of directors has approved a plan to distribute a cash dividend of NT$2.7 per share for the first quarter of this year.
The company’s projection comes amid concerns that inflation, the war in Ukraine and COVID-19 lockdowns in China could hammer demand for gadgets.
TSMC executives acknowledged that smartphones and computers have been hit hard, but said that spending in other areas, such as electric vehicles (EVs), exceeded expectations.
They played down the effects of inflation, saying the increase in prices was gradually abating.
“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,” Liu said. “The utilization rate is full for the rest of the year.”
In response to a shareholder’s question about whether TSMC would build its next overseas fab in Italy or Germany, Liu said the company is still evaluating all possible locations in Europe.
No substantial conclusion has been made, he added.
“Satisfying customers’ demand is our main consideration when building an overseas fab. That is also why we decided to build a fab in the US and Japan. In Europe, we have fewer customers,” Liu said.
The chipmaker is on track to build a new fab in Japan’s Kumamoto Prefecture through a joint venture with Sony Semiconductor Solutions Corp and Denso Corp, Liu said.
The parties have recruited sufficient talent in Japan for the new fab, alleviating shareholders’ concerns about a shortage of semiconductor talent in Japan, Liu said.
The fab is expected to start making 28-nanometer chips at the end of 2024, TSMC said.
Manufacturing costs in the US are higher than expected, but are still manageable, the chipmaker said.
TSMC is not worried about being excluded from a chip manufacturing subsidy bill by the US, which could affect its profitability, Liu said, adding that its long-term gross margin target of 53 percent is achievable.
The chipmaker does not expect Japan-US cooperation in the production of 2-nanometer chips to pose a threat to TSMC’s competitiveness, Liu said.
TSMC has made good progress in developing its 2-nanometer technology in terms of yield rate, he added.
Additional reporting by Bloomberg
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