TSMC CEO Says Chip Shortage to Continue into 2022
Major chip manufacturer, TSMC, has gone on record to say it believes chip supplies will continue to tighten into 2022. It's no secret now that automotive and consumer electronics companies are struggling to find supply. Customers of TSMC, like Qualcomm, have reason to feel even less optimistic after the CC Wei, CEO of TSMC, announced that "...this year and next year, I still expect the capacity tightness will continue.”
But that's not to say TSMC isn't trying.
The chip giant already has plans to build new factories for fabrication and is investing $100 billion over the next 3 years to improve manufacturing capacity. But, according to Wei, a fab that is built and ready to produce more chip supplies won't be available until 2023.
Another factory is planned to open in Arizona in 2024, and this one will produce 5-nm chips for semiconductor wafer production. Once up and running, the plan is for the fab to produce 20,000 chips per month and to also create over 1,600 jobs directly related to the fab. Meanwhile, thousands of indirect jobs are expected to be created within the semiconductor ecosystem as an effect of the new Arizona factory.
Decrease in supply = Increase in demand = Increase in workforce needs
Why the focus on TSMC?
If a picture is worth a thousand words, then how much is a chart worth? Once you've looked at TSMC's chip foundry market share, you'll see that any action they take will have a large effect on chip supplies.
If TSMC is working to improve its production capacity, you can bet on other company's following suit.
Oh, what's that? As if right on cue, a wild Intel has appeared!
Almost like clockwork, Intel announced last month it will invest $20 billion into building two factories to increase chip production in, can you guess?—Arizona.
And, just as TSMC's Wei spoke out about tightened supplies heading into 2022, Intel's CEO Gelsinger has a shared sentiment: "I think this is a couple of years until you are totally able to address it. It just takes a couple of years to build capacity.”
It's all connected, man.
Shortage Benefits the Manufacturer
And it all circles back to trying to reduce lead times and keep customers happy.
In 2021, the average wait time between ordering and receiving chip supplies has rocketed up from 12 weeks to 16 weeks. And if the CEOs of TSMC and Intel are correct in their sentiment, then wait times can only continue to trend upward in the coming months.
The optimist will say the recent statements from TSMC and Intel are an attempt in transparency during a difficult time. Yet the pessimist will say Of course the executives of chip suppliers are willing to play up the already extreme demand for chips.
Every coin has two sides.
Whatever the case: a chip shortage is harmful for the industries that use the chips, and the shortage has benefitted the manufacturers greatly. Just take a look at TSMC's 12-month stock chart with highlighted consolidation in the last few weeks:
You can see a strong uptick in share value during the December-January months when coverage of the chip shortage was starting to grow.
Now, I'm not Goldman or Barron's, so I won't pretend I know how to do any technical analysis. All I know is there is a clear indication that TSMC has benefitted from the chip shortage.
But the Ford's, GM's, Apple's and Qualcomm's are another story. They are battling to meet consumer demand and struggling to find the chips that are necessary.
President Biden and his administration are working to prevent another shortage occurring in the future. President Biden recently met with executives from 19 major companies, including C-level employees from GM, Ford, Chrysler, Google, AT&T, and more. The meeting centered on "increasing transparency in the semiconductor supply chain to help mitigate current shortages and improving demand forecasting to help stave off future challenges, the White House said in a statement," according to reports from ALJAZEERA.
The overall consensus?
For companies in need of semiconductors and advanced chips, things will be worse before they are better.
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