TSMC shares slide as Taiwan plays down Intel's US$20b expansion challenge

Taipei

TAIWAN Semiconductor Manufacturing Co (TSMC) shares fell nearly 4 per cent on Wednesday after Intel announced a US$20 billion plan to expand its advanced chip manufacturing capacity, even as Taiwan's economy minister sought to downplay the impact.

Intel said on Tuesday it will build two factories in Arizona and open its plants to outside customers, directly challenging the two other companies in the world that can make the most advanced chips - TSMC and South Korea's Samsung Electronics.

Shares in TSMC, the world's largest contract chip manufacturer with clients including Apple and Qualcomm, fell as much as 3.9 per cent on Wednesday morning, compared with a drop of around one per cent on the broader market.

TSMC announced plans in May to build its own US$12 billion factory in Arizona, in an apparent win by the then-Trump administration in its push to wrestle global tech supply chains back from China.

Taiwan Economy Minister Wang Mei-hua said Intel's plan was "not a challenge" to the island's formidable semiconductor industry.

"First of all, I believe that our whole semiconductor ecosystem is very good, and secondly our manufacturers are awesome, and are continually advancing their technology," she said. She added that she would be happy to see Taiwan-US cooperation on semiconductors "but of course we still hope they can increase their investment in Taiwan".

The move by Intel's new CEO, Pat Gelsinger, aims to restore Intel's reputation after manufacturing stumbles sent shares plunging last year.

Sherman Shang, a research analyst at Fubon Securities Investment Services in Taipei, said Intel tried to do this before without much success and that "fundamentally" the new plan was no different - meaning TSMC should be unaffected, and its advanced technology was difficult to match in any case.

Mega International Investment Services analyst Alex Huang was more circumspect: "As Intel's new chip fabs come online, TSMC will be under pressure to evaluate its future operating prospects and this will affect TSMC's long-term competitiveness."

TSMC has benefited from the work- and study-from-home trend globally during the Covid-19 pandemic. In January it posted its best-ever quarterly profit - for the fourth quarter of 2020 - and hiked revenue and capital spending estimates to record levels as it forecast "multiple years of growth opportunities".

It is hugely profitable thanks to its gold-standard foundry technology, and plans record capital spending on the production and development of advanced chips of US$25 billion to US$28 billion this year - up to 60 per cent more than it spent in 2020. TSMC's shares have gained almost 10 per cent this year, bringing its market value to US$542 billion. REUTERS