TSMC to invest over US$27 billion in facility construction in 2021, leaving headache for rival Samsung

Samsung looks to become world's largest system semiconductor maker by 2030

TSMC’s logo

Semiconductor fabricators have gone on a spending spree as they vie for global hegemony over the industry.

Taiwanese firm TSMC, the world’s top semiconductor foundry, announced plans to pour around 30 trillion won (US$27.14 billion) into facility investment this year. That’s a headache for Samsung Electronics, TSMC’s biggest rival.

A foundry is a company that fabricates semiconductors, typically for fabless firms that design chips but don’t fabricate the chips themselves.

According to a Reuters report on Jan. 14, TSMC announced in a Q4 earnings report that it would be investing US$25-28 billion in capital spending this year.

That’s over 60% higher than the US$17.2 billion it spent last year. It also exceeds the US$19-20 billion in capital investment that semiconductor analysts had predicted for the year.

TSMC said that its investment sought to take advantage of “multiple years of growth opportunities,” Reuters reported, adding that the company has “revised up its compound annual growth rate targets for revenue during the 2020 to 2025 period to 10-15% from an earlier estimate of 5-10%.”

TSMC posted US$5.1 billion of net profit in Q4 2020, up 23% year on year.

The industry believes that TSMC’s big capital investment is based on surging orders from fabless clients — including Apple, AMD, Nvidia and Qualcomm — in its ultrafine sub-5nm, or nanometer, process.

TSMC said it will allocate 80% of its facility investment this year on its ultrafine 3nm, 5nm and 7nm processes.

According to semiconductor industry analysts, TSMC’s decision to make a record-breaking investment this year reflects its determination to meet the recent surge in demand for semiconductor fabrication while also gaining the upper hand in technological competition with Samsung Electronics in the sub-5nm process.

Analysts say that TSMC’s investment plan for the year probably includes orders from Intel, which is looking into outsourcing some of its cutting-edge manufacturing.

Reuters reported on Jan. 12 that the “DG2” graphics chip for personal computers that Intel is working on will be manufactured using a 7nm process at TSMC. Intel hopes that the chip “will help it combat the rise of Nvidia Corp,” Reuters said.

The implication is that Intel has decided to have its chips made by TSMC, a semiconductor foundry, rather than Samsung Electronics, an integrated device manufacturer (that is, a company that both designs and manufactures chips).

Samsung Electronics, currently number two in the foundry industry, is expected to boost investment in system semiconductors this year as part of its goal of becoming the world’s top system semiconductor manufacturer by 2030. Financial analysts predict that Samsung Electronics will spend 12 trillion won (US$10.86 billion) on facility investment in its non-memory division this year, doubling the amount it invested last year.

By Cho Kye-wan, staff reporter

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