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TSMC to build advanced chip plant in southern Taiwan

Taiwan Semiconductor Manufacturing Co., the world’s biggest contract chipmaker, is looking to build an advanced plant in south Taiwan as part of a $100 billion expansion to address the unprecedented global chip shortage.

The planned chip plant will be in the city of Kaohsiung, home to ASE Technology Holding, the world’s biggest chip packaging and testing service provider, according to people familiar with the matter. It will be the first time for TSMC to have a presence in the industrial harbor city. One of TSMC’s key chemical suppliers, Entegris, is making its largest investment ever in the city.

The plan, first reported by local media, comes as Taiwan’s government steps up efforts to keep more of TSMC’s chip production capacity onshore. Securing a competitive semiconductor industry is not only vital to the democratic island’s economic growth but also has security and strategic implications.

The plant is to churn out chips using cutting-edge 7-nanometer and 6-nanometer tech, currently used to make advanced mobile processors and computing and graphics processors for Nvidia, AMD and MediaTek, sources told Nikkei Asia. Currently, the most advanced chip production in the industry is the 5-nanometer tech used to build mobile processors for Apple’s iPhone 12 and upcoming iPhone 13. The fewer the nanometers, the width between transistors, the more advanced and powerful the chips.

Construction for the new facility will start as soon as next year, sources said, though the plant will not start operating until 2023 or 2024 at the earliest.

The move is part of TSMC’s largest-ever expansion push, which includes spending $100 billion over the three years through 2023 to enlarge production capacity at home and abroad. The chip titan also recently received final regulatory approval to build its most advanced chip plant yet in the Taiwanese city of Hsinchu. In addition, it is finalizing discussions for its first chipmaking plant in Japan.

The Kaohsiung plant will address an expected increase in outsourcing demand from Intel, as well as growing demand from new chip buyers such as Tesla, Google and Amazon.

TSMC once planned to bring 7-nm production tech to the Chinese city of Nanjing to address growing local demand. When TSMC kicked off its Nanjing plant in 2015, China was the company’s fastest-growing market. However, last year it was forced to cut ties with its once-biggest Chinese client, Huawei Technologies, due to U.S. export controls. Escalating geopolitical uncertainties pushed TSMC to rethink its plans for China, and the company instead announced it will spend $2.8 billion to expand mature tech production in the country for more widely used chips.

Currently, TSMC’s most important 7-nm production hub is in the central Taiwanese city of Taichung. The chipmaker continues to add new equipment to the site but the space is almost full, sources told Nikkei Asia, making it necessary for the company to find places to build extra capacity.

TSMC did not comment directly on its plans for the new domestic plant but told Nikkei Asia it views Taiwan as its main expansion hub. The company added that it maintains close contact with local authorities in Hsinchu, Taichung and Kaohsiung to evaluate suitable land for semiconductor plants.

Plans to build an advanced chip plant on the island should come as a relief to the Taiwanese government. TSMC recently departed from its decadeslong strategy of producing the majority of its chips domestically amid a push by major global economies to bring vital semiconductor production onshore.

“The Taiwanese government doesn’t want TSMC to go anywhere,” said Arisa Liu, a semiconductor analyst with Taiwan Institute of Economic Research. “TSMC’s investment this year already accounted for 20% of total Taiwan private investment. It is crucial to Taiwan’s economic growth, tax, and the whole local ecosystem, and high-paying jobs. Not to mention the chip industry now has national security implications and could become a key bargaining chip for Taiwan to have better international negotiations, and also it should make the place safer as no one in the world wants” to build important plants where there might be disruptions.

Taiwanese cities are also keen to attract chip investment, as it presents a valuable opportunity to grow local economies and boost property prices.

“Massive chip investments around key science parks across Taiwan have become a guarantee of increasing property prices,” said Chen Jie-ming, research director of UBHouse, a housing consultancy. “The overall housing price increase was about 10% from last year till this year, but the average price increase could be up to 20% if it’s around science parks and around TSMC’s investment.” Nikkei Asia

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