TSMC will invest $100B over three years to increase chip capacity

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TSMC is no longer taking orders from Huawei.

In terms of chip supply, the COVID-19 pandemic couldn’t have come at a worse time. Major shifts in technology, including the arrival of 5G, coincided with the start of the pandemic. The increase in demand, along with supply chain issues caused by the virus, have created a global chip shortage that now has almost every sector feeling the effects.

Chipmakers have been scrambling to meet the massive amount of demand from around the world. Doing so, of course, requires major investments.

On Thursday, contract chipmaker TSMC announced that it will be investing $100 billion over the next three years to increase the capacity of its foundries. The news comes after the company previously announced plans to invest $25 to $28 billion this year specifically for advanced chips.

Making Moves

TSMC leads the world in terms of manufacturing advanced semiconductors. It spends tens of billions of dollars each year to retain that title. That’s possible thanks to its partnerships with companies like Apple and Qualcomm.

Of course, working with other firms leading their industries means that there is always plenty of demand for chips. The addition of supply chain stress and increased demand caused by the pandemic means that TSMC has a lot on its plate.

In a statement to Reuters, the company said, “We are entering a period of higher growth as the multi-year megatrends of 5G and high-performance computing are expected to fuel strong demand for our semiconductor technologies in the next several years.”

TSMC’s move to invest $100 billion over the next three years is noteworthy. The funds will go towards “the manufacturing and R&D of advanced semiconductor technologies.”

In another statement, the company said, “TSMC is working closely with our customers to address their needs in a sustainable manner.”

At this point, it’s unclear exactly how TSMC will invest the $100 billion to be most effective. Moreover, it’s hard to tell how the company will finance its massive investment. According to Bloomberg, the firm had $28 billion of cash and equivalents on-hand at the end of 2020.

Regardless of how TSMC plans to fund its investment, investors received the news positively on Thursday. Following the announcement, TSMC’s shares rose by around two percent in morning trading. The company’s suppliers, including the likes of Micron Technology, Screen Holdings, and Tokyo Electron also saw their stocks climb.

Given the desperate need for semiconductors around the world, TSMC’s move is a welcome one. Hopefully the company will be able to rapidly increase its production capacity to meet the needs of manufacturers this year and in the future as the chip crisis resolves.

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