Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday said an explosive demand for artificial intelligence (AI) chips has led to pervasive supply constraints and it is accelerating capacity expansions to avert bottlenecks.
“We are trying not to become the bottleneck. Supply is a little bit tight as customer demand has outstripped what we can supply,” TSMC chairman and chief executive officer C.C. Wei (魏哲家) told a news conference after the company’s annual general meeting in Hsinchu City.
“Customers have shown incredibly strong demand in recent years. The growth is insane this year, in particular,” Wei said.
Photo: Peter Lo, Taipei Times
TSMC is also facing short supply of chip manufacturing equipment for advanced chips, he said.
Equipment manufacturers attribute the problem to component shortages from their suppliers, he said.
The growth of the AI industry requires the full support of a variety of components from logic chips, memory chips, packaging, testing and cooling systems, in addition to power supply, Wei said.
“The explosive growth of the AI industry has left the entire supply and ecosystem unprepared and unable to cope,” he said. Supply “restrictions are everywhere.”
Even so, the industry would navigate such constraints, as PC vendors might reduce use of memory chips and downgrade hardware specifications to cope with memory shortages, Wei said.
Eventually, supply and demand would reach parity, he said.
“From my perspective, the supply chain will find ways to reach a balance. They do not want to suffer the pain for a third consecutive year,” he said.
Wei also said he has confidence in Taiwan’s AI supply chain to fend off foreign competition, dismissing concerns that it could lose its competitive edge to South Korea, given Seoul’s strong ambition to build an AI ecosystem by duplicating Taiwan’s experience.
“There are a bunch of Taiwanese companies behind the [AI] ecosystem in Taiwan,” Wei said, citing Hon Hai Precision Industry Co (鴻海), Asustek Computer Inc (華碩) and Wistron Corp (緯創).
“That is not something South Korea can easily replicate [overnight],” he said. “Taiwan has huge competitive advantages in the AI industry and it will maintain those advantages for the foreseeable future. It is not easy for any country to catch up in the short term.”
TSMC’s South Korean competitor has said in recent years that it aims to catch up with TSMC within 10 years, but that was the same objective it missed 20 years ago, Wei said.
In 2019, Samsung Electronics Co again set a goal to beat TSMC by 2030.
“I’ll say that is totally a pipe dream,” he added.
When asked about growing competition from Intel Corp in the US market, Wei said Intel has been one of the company’s top 10 customers. TSMC intends to keep generating revenue from this partnership.
He also said TSMC has "never had a shortage of competitors over the past 30, 40 years. And we have always won. The future will be no different.”
Wei told shareholders that TSMC delivered a record year last year, with its stock more than doubling from NT$950 per share at the same meeting on June 3 last year to NT$2,425 on Wednesday, with the cash dividend rising more than 30 percent to at least NT$24 per share this year from NT$18 a year earlier.
Wei said he remains confident about TSMC’s growth trajectory in the years ahead.
On capital expenditure, Wei said this year's spending is now expected to come in near the upper end of TSMC's projected US$52 billion to US$56 billion range. Asked when spending might plateau, he said simply: "Honestly, I don't know," adding that he sees no indicators warranting a slowdown.
“If shareholders want to buy more shares, please continue,” he said.
Additional reporting by CNA
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