TSMC to build its first chip plant in Japan

TAIPEI - Taiwan Semiconductor Manufacturing Co. world's biggest contract chipmaker announced plans on Thursday to build its first-ever chip plant in Japan, answering Tokyo's call to strengthen the local semiconductor supply chain to cope with an unprecedented global crunch in key components.

C. Wei told investors that the company has received support from both its customers and the Japanese government to proceed with the investment, which is subject to its Board of Directors approval. Wei said the plant will focus on 22 - nanometer and 28 - nanometer special technology that can be applied to many chip types, from image sensors to microcontrollers.

Construction of the factory is planned to start next year, with production expected to begin in 2024.

How much is the investment made by Wei.

The same day TSMC reported its Net profit for July-September rose nearly 14% as the company ramped up production of processors for the new iPhone 13 lineup.

TSMC reported net income of 156.26 Billion New Taiwan dollarsTaiwan dollars $5.6 billion for the quarter, beating market consensus. Its revenue of $414.67 billion was above its guidance.

Its operating margin stood 51.3% and its gross margin was 41.2%, both improved from last quarter ending in June.

Nikkei Asia reported TSMC was finalizing a decision on its first major chipmaking plant in Japan, which the Taiwanese company is targeting to start operating as early as 2023 to mainly supply to Sony. It was reported by Nikkei last week that TSMC and Sony would both invest in the plant.

Japan's push to import critical semiconductor production on shore comes in the wake of a global chip shortage that is hitting industries from PCs to automobiles as well as adding tension between China and Taiwan. Beijing views the self-controlled island and key chip manufacturing powerhouse - as part of its territory and has not ruled out taking control via force. Chips form the core engine that powers smartphones, servers and connected cars, as well as spacecraft and military equipment, making them a matter of national security for countries around the world.

The Japan move marks a further departure from TSMC's decadeslong strategy of concentrating production in Taiwan, where the world's most valuable chip company conducts research and development and operates massive production sites. It has been more than two decades since TSMC allowed partners or clients to purchase stakes in its chip factories. The first example was in 1996, when it jointly invested with clients Analog Devices and Altera, now an Intel company, for its first U.S. manufacturing plant. Just four years later however, TSMC acquired all the shares of its partners.

The Taiwanese chip titan is now building its most advanced chip facility outside of its home base in the U.S. state of Arizona. Liu said the plant will mainly address the demand for infrastructure security and national security-related chips, as requested by clients. TSMC is also considering the possibility of building a plant in Germany.

TSMC is also expanding capacity in China's city of Nanjing, even though the 15 nanometer chip production technology used there remains generations behind 5 nanotech that TSMC is planning to bring to U.S. factories on the Chinese front line.

Arisa Liu, a semiconductor analyst with the Taiwan Institute of Economic Research, told Nikkei Asia that geopolitical pressure is behind TSMC's move to expand production globally.

To operate chip plants in foreign locations will definitely increase costs and we need to monitor closely if that could affect TSMC's profit margin for the longer term. Looking forward, we can foresee TSMC's need to spend more effort on its international operations and recruit more talent to help its likely expansion in multiple countries, Liu said.

The push by major economies to bring more semiconductor production from shore will likely keep production costs - and thus chip prices - high in the mid to long term.