TSMC plans to spend up to US$44 billion for 2022

Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chipmaker, is planning to spend US$40-US$44 billion in capital expenditure for 2022 as part of its efforts in expanding production and upgrading technologies, the company announced on Thursday.

2022 capex budget

In an investor conference which was watched closely by investors at home and abroad, TSMC announced the 2022 capex budget, with the upper limit beating an earlier market forecast of US$42 billion.

The 2022 capex budget, the highest-ever in TSMC's history, is higher than 2021, when the chipmaker spent NT$839.2 billion (US$30.04 billion) in capital expenditure, which was an increase of 65.4 percent from 2020.

TSMC's chief financial officer Wendell Huang (???) said 70-80 percent of the 2022 capital expenditure will be used to develop advanced 2 nanometer, 3nm, 5nm, and 7nm processes as the chipmaker is intent on maintaining its lead over rivals and cementing its market share, which has topped 50 percent.

TSMC will allocate 10 percent of the 2022 capex to sophisticated integrated circuit packaging and testing, and photomasking services in a bid to provide one-stop services to customers, while 10-20 percent of the budget will be used in specialty process development, said Huang.

The 5nm process is the latest technology which TSMC has started mass production of. The chipmaker is scheduled to start commercial production of its 3nm process in the second half of this year in Tainan. TSMC is developing the 2nm process by building a wafer fab in Hsinchu.

Development of 3nm process

C.C. Wei (???), TSMC's chief executive officer, said in the investor conference that the development of the 3nm process remained smooth and on schedule.

Wei's comments came after recent market speculation that TSMC had encountered some technical hiccups in developing the 3nm process and that mass production could be delayed.

Wei said the 3nm process will be used in high-performance computing device and smartphone production.

TSMC did not announce any new overseas investment plans in the conference, while Wei said the company's study on building a wafer fab in Europe remained at an early stage, adding the chipmaker's overseas investment plans were made as the company takes into account customers' needs.

In July 2021, TSMC Chairman Mark Liu (???) mentioned his company was in the early stage of an evaluation on the possibility of investing in Germany by discussing with clients in the country about whether the investment would benefit them.

In late 2021, TSMC announced a plan to invest up to US$2.12 billion in equity investment in the wafer fab in Japan to establish a TSMC-majority-owned subsidiary in Japan to provide foundry services.

It will be the first joint venture for TSMC in a sharp contrast with the company's other wholly owned entities overseas. But, Wei emphasized the presence of its partner Sony, which will hold a stake of no more 20 percent in the joint venture, is expected to allow TSMC to learn about the complementary metal-oxide-semiconductor (CMOS) imaging sensor technology which the Japanese firm specializes in.

Earnings & outlook

Before the investor conference started, TSMC released an earnings report, saying it posted a new high of NT$166.23 billion in net profit in the fourth quarter of last year, up 6.4 percent from a quarter earlier and also up 16.4 percent from a year earlier on record consolidated sales of US$15.74 billion in the three-month period due to robust global demand for emerging technologies such as 5G applications and HPC devices.

Huang said TSMC remained upbeat about the first quarter and expected to generate US$16.6 billion to US$17.2 billion in revenues, with the median figure being 7.4 percent higher than the fourth quarter, indicating the company will feel little impact from slow-season effects in the quarter.

According to TSMC, its gross margin -- the difference between revenue and cost of goods sold -- for the first quarter will range between 53 percent and 55 percent, compared with 51.3 percent in the previous quarter. Analysts said the higher profit margin will likely happen after a product price hike.

Huang said TSMC had set its sights on boosting its gross margin to 53 percent or higher in the longer term.

TSMC's sales are expected to grow 25-29 percent from a year earlier in 2022 in U.S. dollar terms, exceeding an average of 20 percent growth in the global pure play foundry market, said Wei.

Source: Focus Taiwan News Channel