A sign for Taiwan Semiconductor Manufacturing Company (TSMC) is displayed at the company’s headquarters in Hsinchu, Taiwan, on Wednesday, June 5, 2019.
Ashley Pon | Bloomberg via Getty Images
Semiconductor companies around the world are preparing to make major investments in their research and development facilities, in an effort to meet growing demand as global chip shortages intensify.
The world’s largest contract chipmaker, TSMChas committed to invest $100 billion over three years to ramp up production of advanced silicon wafers, which are used to make a variety of chips.
In January, it said its capital spending will grow to 47 percent in 2022, and it plans to spend between $40 billion and $44 billion this year, up from $30 billion last year.
The Taiwanese chip giant, which is headquartered in Hsinchu and has a market capitalization of nearly $600 billion, is building $12 billion factory in PhoenixArizona, and other in Japan to increase capacity. It has several other crafting plants – also known as fabs – in development.
TSMC is certainly not the only chipmaker to invest billions of dollars in high-tech factories, which tend to take three to four years to get up and running.
Competitor Intel announced last March that it plans to spend $20 billion on two new chip factories in Arizona. Intel has been in Arizona for over 40 years and the state is home to a longstanding semiconductor ecosystem. Other major chip companies with a presence in Arizona include On Semiconductor, NXP and Microchip.
SamsungKorea’s largest company, did not give guidance for 2022 but last month the company revealed that they spent 90% of their 2021 total annual investment of 48.2 trillion won ($40.1 billion) into the chip business.
By 2021, semiconductor companies worldwide will have spent $146 billion building new manufacturing and research capacity, according to research firm Gartner. TSMC, Samsung and Intel – three of the largest chip makers in the world – account for 60% of the $146 billion total.
“We see capital [expenditure] nearly doubled over the five-year period 2021-2025 compared to 2016-2020,” Peter Hanbury, a semiconductor analyst at research firm Bain, told CNBC.
“This increase is due to the increasing complexity of new leading edge technologies that have more process steps to create the wafer and require more expensive tools, as well as react to the condition of the wafer. chip shortage with manufacturers increasing capacity across multiple technologies.”
Many other big names in semiconductors – like Nvidia, AMDand Qualcomm Glenn O’Donnell, director of research at analytics firm Forrester, told CNBC – there’s no need to spend such large sums of money because they’re “useless”.
“They design the chip and then contract someone like TSMC to actually make the chip,” he said.
Chip shortage continues
Despite the huge sums invested, the semiconductor industry is still struggling to produce enough chips.
“We can’t make enough chips to satisfy society’s gluttonous need for anything that runs on semiconductors,” says O’Donnell.
Chips are used in everything from kettles and washing machines to headsets and fighter jet missile systems. Many products, such as cars, contain dozens of chips.
Some have speculated that there will be a “chip surplus” once all the new factories produce more chips, but O’Donnell disagrees.
“Humans are addicted to technology,” he said. “Demand will continue to grow, not waning. In fact, I doubt that all these investments are really enough.”
In the short term, Hanbury expects a recovery from chip shortages to be “difficult”, adding that the shortfall in one area allows many different end products (such as PCs) to be manufactured.
“But that then increases demand for all the other chips needed to make the final product,” he said. “It’s a bit like a ‘hit a mole’ problem.”
In the longer term, Hanbury sees little risk of oversupply over the next 2-3 years as it will take some time to build the recently announced chip factories.
“However, we are monitoring future oversupply,” he said, adding that more facilities are likely to be built once governments have finalized and finalized their incentive plans. surname.
Some less well-known chipmakers are also planning to increase their spending this year.
Headquarters in Munich InfineonEurope’s largest chipmaker said on Wednesday it would spend an additional 2.4 billion euros ($2.7 billion) to expand operations to meet demand.
Meanwhile, French-Italian chip maker ST Micro last week said it plans to double its investment this year to $3.6 billion to meet demand. Last year, the company, headquartered in Geneva, had its biggest customers including the electric carmaker Tesla and iPhone maker Apple, spent $1.8 billion.
Several other companies in the semiconductor supply chain will benefit from chipmakers’ investments.
“See companies like ASML, Application materialsand Aviation products“O’Donnell said.” They are the main suppliers to these chip facilities, so they are about to enjoy a boom cycle of their own. “
