The news: Taiwan Semiconductor Manufacturing Co. (TSMC) announced its record spending plan for 2022 to meet continued demand for semiconductors in various industries.
Why it’s worth watching: TSMC is the world’s leading chipmaker, catering to every sector including smartphones, smart home, EVs and automotive, as well as PCs, and has indicated it intends to spend between $40 billion and $44 billion to expand capacity in 2022, per Bloomberg.
Apple, one of TSMC’s biggest clients, is projecting average sales growth of 15% to 20% annually—double the previous expectation. Analysts estimate that Apple accounts for nearly one-fifth of TSMC’s revenues.
- The company focused on Apple and EV chips in Q3 2021, as these were the most profitable markets. Prioritizing its marquee clients placed other chip customers at a disadvantage.
The bigger picture: TSMC is taking advantage of its leadership position to reinvest in increased production and output for 2022.
While various chip fab plants have been announced to bolster production, many of these will not be operational until 2024, giving TSMC and other chipmakers a limited runway to capitalize on their dominance.
- Investments can help TSMC satisfy its customers’ demands and get ahead of efforts in various countries to bring chip production to their shores.
- The US Senate passed a bill last year to provide chipmakers $52 billion in subsidies this year with the Biden administration’s support—Washington's biggest industrial policy investment in decades.
- Q1 of 2022 will be an uphill climb for the entire chip industry. Delivery times for chips increased to 25.8 weeks in December, the longest wait time on record, per the Susquehanna Financial Group.