Taiwan Semiconductor Manufacturing (TSM), the globes biggest independent chip foundry, said last week that it expects the chip shortage that has left automakers scrambling for silicon and cutting back production will be over by the end of the third quarter.
Whether that’s good news or not depends on how much weight you give to this company’s projections. The shortage, which the company said has worsened because of the deep freeze that hit Texas in February and a tie at a major chip factory in Japan last month, will resolve itself as idled factories get back to work and as foundries such as Taiwan Semiconductor add new capacity.
Given the company’s position at the center of the global chip industry, Taiwan Semiconductor is certainly in a position to know. (But the news from that company argues that automakers will be cutting production goals when then announce first quarter earnings and second quarter guidance in the next couple of weeks.)
But the take from this company is markedly more positive than the view from automakers themselves. Just this week, for example, Nissan announced that it would cut 10% of the jobs–or 800 workers–at its United Kingdom plant. The general consensus from auto makers has been that the shortage could last into 2023.
And all this assumes that Taiwan’s chip sector won’t get hit by the continued drought in that country. Chip factories in Taiwan use close to 1,56,000 metric tons of water a day. With rivers going dry in Taiwan companies like Taiwan Semiconductor have been bringing water to factories by truck.
The big winners in al this may be the companies that produce chip making equipment such as Applied Materials and ASML (ASML). Taiwan Semiconductor now expects to invest $30 billion on capacity expansions and upgrades this year. That’s up from the company’s previous forecast of $28 billion.
Taiwan Semiconductor is a member of my long-term 50 Stocks Portfolio. The shares are up 140.67% as of the close on April 19 from my pick on October 7, 2019. Both Applied Materials and ASML are members of my Jubak Picks Portfolio. They are up 26.4% and 3.20%, respectively, since I added them to that portfolio on January 14, 2021 and March 29, 2021.