TSMC announced its huge investment

Several media including BBC reported that TSMC plans to invest $100bn over the next three years to increase its capacity. In fact, Taiwan Semiconductor Manufacturing Co is the world’s largest contract chip-maker. Thus, the company had already shared its plan to spend up to $28bn to develop and produce advanced micro chips.

The reason why TSMC increases its investment is to deal with global chip shortage that affects the automotive industry. What’s more, several automotive manufacturers including Volkswagen, Honda, Toyota and General Motors have intended to reduce production. Automotive companies cancelled their orders when demand slumped due to the pandemic in 2020. On the other hand, the demand is recovering faster than the previous forecast so that shortage of chips happened.

Chip makers prioritize other than the automotive market

However, chip-makers prioritize their products to sell other industries that have greater demand. As a result, the car manufacturers could not retrieve their cancelled orders when demand grew again. Due to strong global demand of chips, the shortage has spread to a number of other sectors including consumer electronics.

The Taiwanese company predicts that strong growth in demand for semiconductor technology is continuing. This is because the pandemic will accelerate digitalization across the globe. In other words, megatrends of 5G and high-performance computing are continuing so that strong demand for semiconductor technologies is either.

Who is TSMC?

According to its homepage, Taiwan Semiconductor Manufacturing Co was established 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.

As a result, TSMC becomes 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 $613,410mn as of March 31st, 2021. The number was among top 10 lists in the world and exceeded Warren Buffett’s Berkshire Hathaway.

TSMC acts aggressively

As we see the other article about Apple’s next secret project, TSMC would be its potential partner. In this article, we can see the company will strengthen its main business: Pure-play foundry business model. What will we come to our mind when we hear from this news?

First of all, the amount, which is $100bn, is unbelievable. How many companies can invest in $100bn in only 3 years? If we were to work in a medium company that earns $10mn profit every year, 10k years are necessary to invest in this amount. In fact, TSMC earned about $47.78bn revenue and $18.50bn profit in 2020. These numbers are still unbelievable, but the company needs more investments.

Therefore, the demand of the semiconductor industry seems promising. It means that the demand of chips will be increasing for the years. If it will not, the Taiwanese company cannot make this decision. What’s more, the competition soars up. In fact, its US rival, Intel, decided to invest $20bn as well.

Without chips, we cannot product so many products including automotive, smartphones and computers. Therefore, this big decision can be just a starting point to the next war of chips.