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The Taiwan Semiconductor Manufacturing Company (TSMC) has approved more capital expenditures in order to expand its chip fabrication capacity. TSMC is the world's largest contract semiconductor manufacturer, and the company is now facing competition from U.S. chip giant Intel Corporation who also plans to enter the market. Intel saw its cash flows drop last year as it committed billions of dollars to build new plants. With today's approval, TSMC has allocated a little over half of its fiscal year 2022 capital expenditure which the company announced at its latest earnings call held last month.

TSMC's Second 2nm Chip Plant In Taiwan's Taichung Sector Sees Potential Open For Expansion

The race between Intel and TSMC is currently focused on developing the 2-nanometer (nm) chip manufacturing technology. TSMC and the foundry arm of South Korean chaebol Samsung Electronics, Samsung Foundry, will both enter 3nm production later this year, and Intel is believed to be sourcing some parts for its semiconductor products from the Taiwanese firm.

At the same time, the U.S. manufacturer is ramping up its semiconductor production after Intel announced an updated technology map early last year. This map renamed Intel's manufacturing technologies to bring them at par with TSMC's products in terms of key metrics such as feature size and transistor density.

One of these processes, dubbed by Intel as 20A, will directly compete with TSMC's 2nm process. 20A is slated to enter early production in the second half of 2024, while TSMC expects its corresponding process technology to enter mass production in 2025. Intel's Intel 4 process, thought to lie somewhere in between TSMC's 5nm and 3nm nodes, will enter production in the latter half of this year with products slated to ship in 2023.

Now, as per a report by the United Daily News (UDN), Taiwan's Taichung sector administration has approved expansion plans for expanding its science and industry park. These plans will now reserve an additional 94 hectares for the park, and provide companies such as TSMC more land should they decide to build out more plants.

Taichung mayor Ms. Shiow-Yen Lu during a ceremony in Taiwan late last year interacting with members of the press. Image: Chen Qiuyun/UDN

TSMC refused to comment on expanding its 2nm facility plans in Taichung after city officials confirmed the science park expansion. The company is currently believed to be focusing its efforts on building a 2nm facility in Taiwan's Hsinchu sector. This plant, confirmed by TSMC"s management in June last year, was at the time waiting for land acquisition. Taichung city officials and TSMC management have also been purportedly discussing plans for expanding 2nm production and officials have raised concerns about the high environmental impact from the facility.

The Taiwanese fab also allocated $20.9 billion in funds for capital expenditure in a board meeting held earlier today local time. TSMC has reserved between $40 billion and $44 billion in funds for capital expenditure, and the company's statement regarding today's allocation reads as follows:

Approved capital appropriations of approximately US$20,944.17 million (approximately NT$555,017.75 million) for purposes including: 1) Installation and upgrade of advanced technology capacity; 2) Installation of mature and specialty technology capacity; 3) Installation of advanced packaging capacity; 4) Fab construction, and installation of fab facility systems; 5) Second quarter through fourth quarter 2022 R&D capital investments and sustaining capital expenditures.

Ths spending comes as worries persist in the chip segment of an inventory correction either in the second half of this year or in early 2023. Restrictions imposed in the wake of the ongoing pandemic saw demand for consumer electronics and other technology products increase, which in turn placed a greater burden on chip manufacturers such as TSMC.