TSMC Ramps Up Chip Production Despite Fears of a Global Slowdown

Taiwan Semiconductor Manufacturing Co (TSMC) (TSM), the primary chipmaker for Apple (AAPL), is set to ramp up production of its microchips, even as other chip makers cut back on demand concerns.  Bloomberg reported that TSMC kicked off mass production of its advanced 3-nanometer (nm) chips today at its Taiwan campus in southern Taiwan.

Despite fears of recession and uncertainty over the impact of U.S. sanctions on Chinese technology, TSMC is moving ahead on the next generation of chipmaking.  TSMC Chairman Liu expressed confidence in the longer-term outlook for chip demand and said today that “the semiconductor industry will grow rapidly over the next decade.” However, TSMC cut capital spending plans by at least 10% to $36 billion this year, and some analysts warn it may further delay spending plans in 2023.

Taiwan is home to more than 90% of the manufacturing capacity for the world’s leading-edge chips.  Many countries are concerned about their technological reliance on Taiwan, an island that China has threatened to invade, and has pushed TSMC to shift some of its production abroad.  TSMC announced that it will offer 4 nm chips at a new Arizona plant in 2024 and 3 nm chips at a second U.S. plant in 2026.  The company is also boosting capacity in Japan and exploring new production sites in Germany. 

TSMC has also announced plans to domestically produce 2 nm chips, keeping the most advanced chipmaking technology at home.  Microchips carrying transistors with smaller line widths are generally more capable and power efficient.  TSMC said its new 3 nm chip processes offer better performance than its 5 nm chips and require about 35% less power.  Chairman Liu said demand for the 3 nm chips is “very strong,” and the 3 nm technology will help create end products with a market value of $1.5 trillion within five years.

The growing dominance of TSMC’s high-end chipmaking coincides with U.S. sanctions on China’s semiconductor industry.  The U.S. has put restrictions to limit China’s access to advanced chipmaking and artificial intelligence technology, which the U.S. wants to keep away from China’s military.  In October, the U.S. unveiled sweeping measures that limit what U.S. companies can sell to China and is pushing for its allies to follow suit. 

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