TSMC warns of chip supply shortages

Demand for the advanced chips outstripped supply in the first quarter of this year, the head of the world's biggest contract chipmaker said on Tuesday, raising the prospect of component shortages and delays to some of the world’s most popular consumer gadgets later this year.

Morris Chang, chairman of Taiwan Semiconductor Manufacturing Co, said all electronics sectors had showed stronger than seasonal demand. “We have been building capacity as fast as we could and the result is still that demand is 30 per cent greater than supply,” he said.

TSMC controls half the market for contract chipmaking and its chips are an integral part of a wide range of digital products. TSMC generally leads its competitors in technology for advanced chips.

A shortage of chips at this level is generally not felt by consumers until at least several months after chip manufacturers report supply issues because semiconductor groups sit at the beginning of the technology supply chain. But there are already other signs emerging that manufacturers may not be able to keep up with the pace of consumer demand.

Apple has blamed the delay of the international launch of its new iPad tablet computer on a struggle to meet demand in the US. Many flat panel makers in Taiwan and Japan are running at full capacity.

Mr Chang's comments underline the strength of the recovery in demand for technology products. TSMC reported its biggest quarterly profit in more than two years. Net profit rose to T$33.6bn, from T$1.56bn in the first quarter of last year as revenue more than doubled from a year ago to T$92.2bn. TSMC expects second quarter revenue to breach T$100bn.

Mr Chang said that while the pace of growth may moderate over the next few quarters, the overall chip industry was still expected to grow 22 per cent this year compared to the last. TSMC's plants are likely to continue to run at full capacity for the next year, he added.

“In the very short term [over the next nine to 12 months], it makes no sense to ask our customers to give us more orders [because of the lack of capacity] ... Perhaps in a year or two our utilisation will drop below 100 per cent, but we'll take that in stride,” he said.

TSMC also announced it would break ground on a new plant in central Taiwan in the middle of this year. The new plant, called Fab 15, will be able to produce over 100,000 12-inch wafers per month. TSMC currently has two such plants.

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