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TSMC plays down chip oversupply concerns, predicts strong 2022 demand following fourth-quarter growth

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Taiwan Semiconductor Manufacturing Co (TSMC) said on Thursday that mature chip-making technology using the 28-nanometre node process will be a "sweet spot" in 2022, downplaying concerns of oversupply as the company expands leading and mature capacity across several countries to contend with the ongoing global chip shortage.

TSMC CEO C.C. Wei, said in a conference call with analysts on Thursday that long-term demand for sensor chips and volatile memory chips, along with silicon enrichment across several sectors, will support the expansion of 28nm manufacturing capacity. The risk of a 28nm chip glut within the next year remains minor, he suggested.

"TSMC appears more positive about its outlook," Sravan Kundojjala, a senior analyst at Strategy Analytics, wrote on Twitter. "It sounds confident when it comes to the risk of oversupply and inventory correction."

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The company has also been expanding in more advanced nodes. The company set 2022 capital expenditure to between US$40 billion and US$44 billion, with up to 80 per cent going toward the 2nm, 3nm, 5nm and 7nm advanced processing nodes. Another 10 to 20 per cent will be spent on speciality technology, for uses other than computer processors, the company said.

TSMC, the world's largest contract chip maker, has been ascendant as its manufacturing capacity became even more sought-after during the chip crunch. In addition to being the top choice for chip designers like Apple, governments have courted the Taiwanese chip giant as they seek to protect local supply chains.

TSMC recently teamed up with Sony Corp to build a 28nm foundry in Japan, with support from the government. It has also been working on a more advanced fab in the US, where its facility in the southwestern state of Arizona will focus on the 5nm process for processors powering the likes of iPhones and similarly sophisticated devices.

"We see TSMC's advanced technology will continue to be supported by demand from Apple and its high-performance computing clients in 2022," said Eric Tseng, chief executive of Taiwan-based Isaiah Research, adding that it will be a main driver of company growth.

This strong demand for high-performance computing, as well as 5G, helped lift fourth-quarter revenue, Wei and CFO Wendell Huang said in a conference call on Thursday.

TSMC reported revenue of US$15.74 billion for the final quarter of 2021, up 24.1 per cent year on year. Profits rose by more than 16 per cent to NT$166.2 billion (US$6 billion), up from NT$142.8 billion a year earlier.

Wei said TSMC expects capacity to remain tight throughout 2022 amid heightened demand for its leading-edge capacity, as customers seek to maintain more inventory to prevent supply shocks.

"2022 will be another year of strong growth for TSMC," Wei said. He expects the global semiconductor market, excluding memory, to grow 9 per cent for the year, and TSMC's revenue growth to outpace the foundry industry's expected 20 per cent growth rate.

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"We expect TSMC to maintain its strong technological leadership under healthy market demand amid the global chip shortage," said Kristine Lau, an analyst with research company Third Bridge. "TSMC's price hike should provide a tailwind for growth and is a testament to their dominance in cutting-edge nodes."

In the fourth quarter, 5nm technology contributed to 23 per cent of the company's total revenue, while 7nm technology accounted for about 27 per cent. For all of last year, 5nm manufacturing contributed 19 per cent of revenue, up from 8 per cent in 2020. The share of revenue from the 7nm process was down by two percentage points to 31 per cent.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2022. South China Morning Post Publishers Ltd. All rights reserved.