TSMC anticipates the global auto component shortage will improve in Q2 2021

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Taiwan Semiconductor Manufacturing Company (TSMC) anticipates the global shortage of automotive components will become significantly less severe in the second quarter.

However, the industry’s top contract foundry stated that the larger world chip crunch could extend into 2022. The leaders of Intel and other top semiconductor providers have offered similar projections regarding the crisis.

The firm also made a major positive revision to its Q2 2021 revenue projection and its full-year business growth forecasts.

TSMC Predicts Near-Term Easing of Automotive Component Shortage

TSMC CEO C.C. Wei explained that the corporation is committed to supporting its automotive clients during a recent earnings call. He noted the company managed to improve its productivity, which will increase its output of vehicle components. It announced plans to launch a “super hot run” to expedite the fabrication of its electronic car parts in January.

The contract chipmaker also said it would reallocate some of its production capacity to make more electronic vehicle parts.

TSMC provides pure-play foundry services to leading auto component makers Renesas Electronics, Infineon Technologies, and NXP Semiconductor. Because of its extensive fabrication resources, its prioritization of personal transport silicon should have a meaningful impact on the shortfall.

In addition, Intel CEO Pat Gelsinger recently said the corporation would step up to help alleviate the chip crunch. It indicated it would utilize its robust fabrication resources to make parts for the vehicle sector and commence production in 6 to 9 months.

Because of TSMC and Intel’s efforts, auto companies should have greater access to crucial semiconductors before year’s end.

Foundry Tightness to Continue and Production Capacity Expansion

TSMC expects the wider semiconductor supply chain to become less constrained over the course of this year. CFO Wendell Huang said the firm’s fabless customers would experience higher than seasonal inventory levels as 2021 progresses. Unfortunately, Wei noted TSMC foundry space is still tight and will likely remain limited into 2022.

Still, the chipmaker’s chief executive believes the situation will improve in 2023 as its new fabs and production lines go online. The foundry also said it invests $30 billion this year upgrading and building out its manufacturing footprint. Previously, it estimated its 2021 capital expenditure would range between $25 billion and $28 billion.

Earlier this month, it unveiled plans to spend $100 billion of the next three years to expand its production capacity substantially.

Although TSMC’s financial outlays are staggeringly high, its spending makes sense in the context of its circumstances. It recently stated that it is running its fabs that “over 100 percent utilization” to address chip shortage-related customer interest. At present, it anticipates its demand for its services will remain high into next year.

Because of those conditions, it offered positive guidance for its near-term earnings and its long-term growth.

The company expects to generate between $12.9 billion and $13.2 billion in Q2, up 19.17 percent year-over-year at the midpoint. It also raised its 2021 annual income growth rate to 20 percent. In January, it pegged its full-year revenue expansion at 15 percent.

Despite its significant resources, TSMC cannot build new fabs or manufacturing lines overnight. However, its decision to dedicate its financial resources to mitigate the impact of the semiconductor crisis on its automobile industry partners is laudable. And its massive production capacity-related financial outlays will protect its customers from future disruption.

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