TSMC Pumps Billions Into Chip Capacity as China's Key Players Emerge
The global leader in chipmaking continues to show stellar sales despite losing some big clients like Huawei. Now, Huawei is building its own chip force.
CapitalWatch Staff
CapitalWatch Staff
Jan. 13, 2022 21:12
TSMC Pumps Billions Into Chip Capacity as China's Key Players Emerge

(CapitalWatch, Jan. 13, New York) Shares in TSMC rallied Thursday as the world's No. 1 chipmaker released stronger-than-anticipated results for the fourth quarter and revealed plans to spend up to $44 billion on capacity this year.

Taiwan Semiconductor Manufacturing Co. (NYSE: TSM) beat analyst expectations in the three months through December. The company reported $1.15 earnings per share, a 19% year-over-year increase. Sales rose 24% compared to the year-end of 2020, reaching $15.74 billion. Further, TSMC said it expects to generate revenue of between $16.6 billion to $17.2 billion in the first quarter of 2022, also topping analyst predictions.

By midday Thursday, the company's stock was trading 6% higher, at $140.10 per share, on the NYSE. The company has especially seen its stock rise since the new year – on the last day of 2021, TSM shares closed near $120 apiece, marking 17% gains from the company's long-term stay at between $115 to $120 at which it traded since March 2021.

Notably, the main supplier for fabless technology giants including Apple (Nasdaq: AAPL), Nvidia Corp. (Nasdaq: NVDA), TSMC is addressing the global chip shortage head-on and plans to spend record sums on capacity expansion in 2022. The company said it plans to invest between $40 billion and $44 billion in 2022 alone – this will help solidify TSMC's global leadership as other companies around the world are also throwing resources into overcoming chip shortage.

And China is someday bound to be a key chip country, thanks in part to the U.S. sanctions. Currently far behind Taiwan, the nation has been propelling its lagging chip industry forward, and Huawei, the tech giant whose business suffered significantly under Trump's sanctions, is at the forefront of this move.

China Gathers Chip Strength

Earlier this week, data from IFI Claims showed TSMC ranked fourth on the list of top 50 U.S. Patent Assignees in 2021. Notably, Huawei Technologies, the Washington-sanctioned Chinese tech titan and a big former client of TSMC, ranked in fifth spot on that list. The two companies were the biggest movers in 2021 among U.S. patent applicants, according to IFI.

Meanwhile, as Huawei has been cut off from not only the U.S. technologies but also chips from TSMC, the company has been investing heavily into chipmaking at home. In late December, news surfaced that Huawei, which also designs ICs but cannot print them, is building a plant in Shenzhen together with Semiconductor Manufacturing International (HKEX: 0981), China's largest foundry. Progress in the industry is strongly supported by the Chinese government, and the project is getting official funding in undisclosed amounts, GizChina reported.

In addition, Huawei has been backing companies producing semiconductor materials. Thus, through its Huawei Hubble, it has invested $46 million in Xuzhou B&C Chemical Co., which produces photoresist. 

Huawei has also become a stakeholder in Suzhou Jingtuo Semiconductor Technology, a maker of special equipment for semiconductors, laser companies Qingdao Tianren Micronano and RSLaser Opto-Electronics Technology Co., and semiconductor startup Vertilite, to name a few.

In the meantime, Washington is considering tougher restrictions on the aforementioned SMIC. The Chinese foundry was already banned from U.S. trade under Trump; lately, Biden has considered extending the sanctions outside the U.S. to the allied countries, similar to Huawei. 

Listed in Hong Kong and Shanghai, SMIC plans to release its fourth-quarter results on the evening of Feb. 10.

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