TSMC Has Good News For Automakers As Chip Shortage Could Go Away This Quarter

TSMC or Taiwan Semiconductor is the world's largest chipset foundry based in Taiwan which has been operating at peak capacity for over a year which has been at the root of the global semiconductor shortage. It has yielded a crippling blow particularly for the automotive industry but now it has now revealed that it expects the global chipset shortage to abate by the end of the quarter. TSMC as per a Wall Street Journal report has ramped up the production of auto chips and is on track to increase the output of micro-controllers used in automobiles by about 60 per cent in comparison to 2020. The WSJ report cited CC Wei, the CEO of TSMC who revealed the information in the chip manufacturers Q2 earnings call.

As for the broader semiconductor shortage, things are still pretty grim as the shortage could persist till the end of 2022. The dearth of semiconductors for home appliances, gadgets, PCs, smartphones, video game consoles has caused a shortage for automakers who traditionally use chips based on older manufacturing techniques and don't need aggressive miniaturisation and power-saving technologies that tech gadgets need.

In the fourth quarter, sales for TSMC's auto chips jumped 27% from the previous quarter

A pandemic induced increase in demand, coupled by shutting down of facilities during initial lockdowns and a transitionary phase for the entire tech industry where the likes of TSMC, Intel, Samsung and Global Foundries are upgrading their facilities to newer manufacturing processes has created the perfect storm for the global semiconductor shortage which have particularly harmed the auto industry.

But TSMC's Wei pledges that this shortfall for the auto industry could be offset in the next few months. It also comes at a time when global automakers have pushed TSMC to give it higher priority over its other clients. For TSMC trough, consumer electronics companies, particularly, the likes of Apple, Nvidia, Qualcomm and AMD are its most important customers. The influence of these tech giants has forced automakers to put more pressure on the world's largest manufacturer of chips to free up more capacity for their needs.

TSMC revealed that in Q2 its revenue for auto chips increased by 12 per cent, but it was a drop in the ocean in the scheme of things as it accounted for 4 per cent of its revenue. Revenue from smartphone chips fell by 3 per cent though it still commands a major chunk of the pie at 42 per cent. TSMC is betting that as automakers transition more to electric powertrains, revenue from the auto sector will climb as will profits as these vehicles need computational capabilities for optimisation of the battery, running new kinds of infotainment experiences that are inspired by gadgets like the iPhone and iPad and self-driving paradigms.

Self-driving chips like Nvidia's AGR ORIN SoC are manufacturer by TSMC

TSMC has expanded its facility in Nanjing, China particularly for automakers. This comes after it pledged a whopping $100 billion to increase production for semiconductors as the need for consumer electronics increased dramatically because of the work-from-home phenomenon. It is also building a $12 billion fab in Arizona for more expansion in the US, where it has major clients like Apple, Tesla, Nvidia, AMD and Qualcomm.

It has also added Intel as a client which has been struggling with the manufacturing of its own chips. Intel is also in the mix to acquire Global Foundries as it opens up its manufacturing business to third parties. Global Foundries was previously AMD's manufacturing unit which it spun off as a separate company and went fab-less as a chip design giant.