US fab part of TSMC capex surge to $28 billion

January 15, 2021 // By Peter Clarke
US fab part of TSMC capex surge to $28 billion
Foundry TSMC, has set a capital expenditure budget for 2021 of between $25 billion and $28 billion, that will leave other chipmakers gasping in its wake.

The company said that about 80 percent of that money would be spent on advanced manufacturing at the 3, 5 and 7nm processing nodes, while 10 percent would be on packaging and masks and 10 percent on other specialty technologies.

TSMC gave the information in an analyst conference call held to discuss the company's 4Q20 financial results. In the quarter the company made a net profit of NT$142.77 billion (about US$5.10 billion) on revenues of NT$361.53 billion (about US$12.91 billion). TSMC forecast 1Q21 sales revenue of between US$12.7 billion and US$13 billion suggesting a strong quarter.

However, the eye-opening news was TSMC's capital expenditure, a near-doubling of what it had planned to spend in 2020. A year ago the company budgeted between $15 billion and $16 billion for capital expenditure but ended up spending $17.2 billion.

One reason for the increase is TSMC's bullish view of the semiconductor market after having enjoyed a strong 2020 despite, or perhaps because of, the Covid-19 pandemic. Its annual sales increased 25.2 percent Taiwanese dollars and 31.4 percent in US$.

As a result, TSMC has increased its long-term outlook saying it now expects the company to achieve a compound annual revenue growth of 10 to 15 percent from 2020 to 2025, up from the 5 to 10 percent it had previously used.

Rival Samsung Foundry is vertically integrated within the South Korea consumer electronics giant and therefore has the means to try and keep up with TSMC capital expenditure if it chooses. Intel is the world's largest chip company with an expected revenue of $70 billion – compared to TSMC's $47.8 billion – could also spend heavily. But almost all other chip companies, whether integrated device manufacturer (IDM) or foundry could not compete.

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