TSMC Unfazed by Intel’s Plans to Build Big Foundry Business, Says CEO
The $100 billion in capital expenditures that Taiwan Semiconductor Manufacturing Co. plans to make in the next three years to expand capacity and help relieve the global chips shortage (see 2104150034) will include $30 billion in spending for 2021 -- 74% more than in 2018, 2019 and 2020 capex spending combined, said a Form 20-F annual report for 2020 filed Friday with the SEC. TSMC CEO C.C. Wei, after announcing the $100 billion investment on Thursday's Q1 earnings call, also said he isn't worried about TSMC customer Intel’s recently announced plans to jump into the competitive foundry business in a big way.
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TSMC expects to use its “operating cash flow” to fund its 2021 capital expenditures and plans to apply proceeds raised from newly issued corporate bonds, said the report. Its 2021 capex focus will be on installing and expanding capacity, mainly for 5- and 3-nanometer nodes, building more capacity for “advanced packaging and specialty technologies” and expanding the capabilities of existing facilities, including the 300-millimeter wafer fab it’s running in Arizona, it said.
TSMC also will spend a portion of the $30 billion this year to invest in R&D projects for “new process technologies,” said the report. “We are working closely with our customers to address their needs in a sustainable manner,” and justify the $100 billion in capex investments through 2023, it said. “These investment plans are preliminary and may change according to market conditions.”
The markets for TSMC’s foundry services “are highly competitive,” said the report. “We compete with other foundry service providers, as well as a number of integrated device manufacturers. Some of these companies may have access to more advanced technologies than us.”
CEO Wei nevertheless said on Thursday’s earnings call he’s unfazed by Intel’s March 23 announcement it plans to build a world-class foundry business under new CEO Pat Gelsinger. “TSMC is everyone's foundry and supports all our customers openly and fairly,” said Wei. “Intel is an important customer, and we will collaborate in some areas and compete in other areas.” TSMC “has never been short on competition in our 30-plus-year history, yet we know how to compete,” he said. Intel didn’t respond to questions.
TSMC, the world’s largest pure-play chip foundry, drew 62% of its 2020 revenue from customers in North America, 2 share points higher than in 2019, said the report. China was TSMC’s second largest customer base, but its 2020 share dipped 3 points to 17%, largely due to Commerce Department export restrictions on Huawei. TSMC halted shipments to Huawei Sept. 15 to comply with the restrictions, but it worries that recent Chinese countermeasures might leave the company vulnerable to future legal liability, said the report.
China adopted a “blocking statute” in January that entitles Chinese companies harmed by “a multinational’s compliance with foreign laws to seek civil remedies” from that multinational, including possibly TSMC, said the report. TSMC operations “have not been materially affected” by Commerce’s expanded export controls on Huawei or Chinese measures “adopted to counteract them,” but that could change, it said.