TSMC’s expansion overseas

Several media including Reuters reported that TSMC would start building its first factory in Japan from 2022. In addition, the Taiwanese company will start mass production by 2024 based on its announcement.

TSMC is the abbreviation of its official company name, which is Taiwan Semiconductor Manufacturing Co. The founders established the company in 1987. Its head office is in Hsinchu Science Park, Taiwan, and TSMC pioneered the pure-play foundry business model. The company focuses on manufacturing customers’ products and chooses not to design, manufacture or market any semiconductor products under its own name.

Now, TSMC is the world’s largest semiconductor foundry, manufacturing 10,761 different products using 272 distinct technologies in 2019. In fact, the market capitalization of the company became $570,36mn as of October, 2021.

Government support

Some media reported that the company would work together with Sony and Denso to establish the factory in Japan. In addition, C.C. Wei, the CEO and the president of TSMC, mentioned in the following.

“We have confirmed the commitment from the Japanese government as well as our clients for the project.”

In fact, Fumio Kishida, a new prime minster of Japan, told that the Japanese government decided to support TSMC’s project by almost 1trillion JPY (about 8.8billion USD). This is because chip is one of the most important products in the world now. What’s more, many countries including Japan and the US rely on import to secure chips.

Therefore, not only Japan but also the US and the European Union invest in each place to increase chip production. In other words, they want to create new supply chain in each continent. It seems that the new factory in Japan will produce chips that are from 22nm to 28nm. This size of chips will be used for mainly automotive and the industrial products.

Chip shortage

We think that the pandemic is one of the biggest issues in 2020 and chip shortage is one in 2021. As a result, even Toyota decreased its production in the third quarter of 2021 due to chip shortage. Since the pandemic starts, people across the globe needed more laptops and tablets. In addition, once each country restored its economic activity, so people demanded automotive more.

However, chip foundry companies including TSMC prioritized to produce smaller chips, which are used for smartphones and other electronics. In addition, the production of chip needs huge investment like TSMC’s factory in Japan. Therefore, chip foundry companies do not decide to increase their investment soon. In this sense, the support from each government really works well. This is because foundry companies can receive its benefit, and because government can secure supply of chips.

When it comes to TSMC’s new factory in Japan, we should think of electric vehicles as well. This is because the size of chips that the future factory will produce is relating to automotive. Thus, the automotive industry is facing the biggest and most important trend, “electrification”. However, the Japanese automotive manufacturers are behind European, American and Chinese car makers in terms of EVs.

Therefore, the Japanese government and Japanese companies should take electrification into consideration to collaborate with TSMC.