Delivery bottlenecks hit TSMC and the semiconductor industry

ANThe semiconductor industry is facing a new problem. With the anticipated expansion of capabilities in Asia, the Americas and Europe, there are increasing bottlenecks in the machines needed for computer chips. “We have been seeing these tool delivery issues unexpectedly since the beginning of this year,” Taiwan Semiconductor Manufacturing Company (TSMC) director CC Wei said Thursday when the quarterly results were presented.

Patrick Welter

Business and political correspondent in Japan based in Tokyo.

For this year, TSMC has no problem with that, Wei said. Deliveries for 2023 and beyond are in the works. He was silent on how much the development would affect TSMC’s investment plans. According to him, the problem affects the production of latest generation chips, but also those of previous generations.

TSMC with record profits

Supported by continued strong demand, especially from high-performance chips and from the auto industry, TSMC significantly improved its financial results in the January-March period, reaching record values. Sales rose 36 percent to 491.1 billion New Taiwan dollars (15.6 billion euros). Profits hit a record NT$202.7 billion, or 45 percent more than a year ago. Gross margin rose to a record 55.6 percent. The fact that TSMC significantly increased the prices of its chips last year contributed to the increase in profits. This is possible thanks to the sharp increase in demand for chips in the wake of the pandemic.

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For a detailed view

TSMC is the world’s largest semiconductor contract manufacturer, which, among other things, produces the logic chips for the products of the US electronics company Apple. The company supplies many other electronics manufacturers, but also car manufacturers. Because of its size and because of extensive connections to the electronics industry, the company is considered something of a leading indicator for the industry.

Wei said capacity would remain tight this year. Therefore, the chip shortage is not expected to abate. Semiconductor demand from the auto industry remains strong, Wei said. He said sales could grow more this year than the 25 to 29 percent previously forecast. This is a sign that the Ukraine war and the inflationary shock may not affect the industry as much.

Investments in billions

According to TSMC’s analysis, customers continue to have unusually high inventories of computer chips. Wei did not see this as an impending weakness in demand for final products, but rather as a structural change in response to supply difficulties during the pandemic.

TSMC and other major semiconductor manufacturers such as Intel and Samsung Electronics have announced new factories and investments worth billions to meet demand. Investments are also being driven by many governments’ desire to be less dependent on Asian countries like Taiwan or South Korea for semiconductors. In the course of this development, TSMC has given up its principle of concentrating production in Taiwan. Investments are being made in new plants in Japan and the United States. This year TSMC wants to invest 40 billion to 44 billion dollars.

This investment trend is now contributing to equipment vendors’ supply difficulties. Wei pointed out that TSMC suppliers have to deal with the consequences of the pandemic for the supply of semiconductors in other precursors. TSMC has dispatched teams of employees to vendors to support them in identifying critical chips affecting machine delivery. The shortage of chips means that new investment makes it difficult to overcome the shortage.

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