TSMC's sharp increase in capital expenditure is the main reason for the shortage of chip production capacity.

In the context of the shortage of semiconductor chip production capacity, TSMC, as the global contract manufacturing leader, continues to raise capital expenditure. According to foreign media reports, TSMC will hold a legal meeting on April 15 to increase capital expenditure to US $30 billion-31 billion in 2021 because of the sharp rise in the pressure of production capacity falling short of supply and demand.

At the beginning of this year, TSMC projected capital expenditure of $25 billion to $28 billion in 2021. The increase is 10-20%.

Just earlier this month, TSMC announced that it would invest $100 billion to expand production over the next three years.

There is a strong demand for automotive chips in the off-season of Q1 in 2021.

According to TSMC's latest first-quarter and March results, TSMC's revenue in March 2021 was about NT $129.13 billion (29.7 billion yuan), up 21.2% from February and 13.7% from a year earlier. Revenue in the first quarter of 2021 totaled NT $362.41 billion (83.4 billion yuan), up 16.7% from a year earlier.

Wei Zhe-Jia, president of TSMC, said that in the first quarter, factors such as strong demand for high-performance computing, a pick-up in demand for vehicles, and a slightly moderate seasonal impact on smartphones led capacity utilization to remain high-end; although customer inventory remained higher than the seasonal water level, it was also observed that due to the uncertainty of the general environment, the supply chain predicted that customers' current inventory level would be maintained for some time to ensure a smooth supply.

In addition, Wei added that demand for automotive semiconductors began to recover in the fourth quarter of last year, and the recent serious shortage of automotive chips will continue to work closely with customers to alleviate the shortage of automotive chips.

Advanced manufacturing processes and building factories in the United States all require heavy investment.

In addition to the strong demand for chips, the huge cost of developing advanced processes and building factories in the United States is also the reason for the additional expenditure of TSMC this time.

In terms of advanced processes, TSMC will speed up the R & D and mass production scale of advanced processes such as 3nm and 2nm. Among them, the construction of the fourth to sixth phases of the Fab 18 plant built for 3nm is being accelerated and is expected to start installation in the first half of next year and mass production in the second half of next year; the new 2nm fab in Hsinchu Baoshan will start construction next year.

In addition, TSMC plans to invest in setting up a 5nm fab in Arizona, USA. The first phase of the project with a monthly capacity of 20, 000 wafers will be mass-produced in 2024. However, the cost of setting up a wafer fab locally is significantly higher than that in Taiwan. According to industry estimates, the cost of manufacturing 5nm wafers after mass production will be 20 per cent higher than in Taiwan.

Concept stocks related to the industry chain are expected to continue to benefit.

Industry insiders say they are optimistic that TSMC will actively invest in new wafer plants and expand the procurement of equipment and spare parts, and related concept stocks are expected to benefit directly.

Among the A-share semiconductor equipment manufacturers, medium and Micro Semiconductor is the only domestic equipment company among the five suppliers of etching equipment for TSMC's 7nm production line, and its 5nm etching machine has also entered TSMC's supply chain.

The aN/SiC testing equipment of Huafeng Measurement and Control is also supplied to TSMC.

Among the customers of SOD/ precursor, the core product of Jacques Technology subsidiary UP Chemical, TSMC is on the list.

In addition, Watt Gas is the only special gas company certified by Asma (ASML), the leader of the global lithography machine, and its products have been able to supply 5 nm process for TSMC in bulk.