From 2022, semiconductor demand has shown signs of decline, but foundry capacity expansion seems unstoppable, so there are concerns that the global foundry market may experience excess capacity in 2024.

According to Digitimes, the sources said that new production capacity of foundries and international IDMs will come online one after another from 2023, and production will peak in 2024-2025. They warned that if demand did not grow as fast as expected, it could lead to excess capacity.

The global chip shortage was triggered by strong demand for home applications brought on by the pandemic and ongoing U.S.-China trade tensions, prompting the U.S., China, the European Union and Japan to strengthen local semiconductor supply chains. Inviting TSMC to build fabs in these regions could be one of the fastest ways to build up its own production capacity, the sources said, adding that even Singapore and India are reportedly inviting TSMC to build fabs for 7nm to 28nm production Node's chip.

Because of its important geopolitical position, TSMC has been under intense pressure to build fabs in the U.S. and Japan, despite high construction spending there. Its new 5-3nm fab in Arizona, USA, is scheduled to start mass production in 2024, while its 12-inch fab in Kumamoto, Japan is currently under construction in cooperation with Sony and Denso, and plans to have a 12-inch fab by the end of 2024. Production of 16nm and 22-28nm chips is commercialized with an estimated monthly capacity of 55,000 chips.

However, TSMC found that fab construction costs in the U.S. and Japan have risen sharply due to rising global inflation. This, coupled with the fact that many EU countries have already started working with Intel, and Japan-based IDM has also started capacity expansion, the sources said, leaving TSMC still in the evaluation stage in terms of invitations from European customers to set up manufacturing operations in Germany.

In addition to building new fabs in the U.S. and Japan and expanding capacity at its manufacturing base in mainland China, TSMC is building fabs at full speed in Taiwan, including a 7-28nm fab in southern Kaohsiung, and a fab in southern Taiwan. Park, Hsinchu Science Park and Central Science Park to build 2-3nm fabs.

With production at the new capacity peaking in 2024-2025, TSMC will have to reconsider any new capacity expansion projects other than those already underway, the sources said. They believe that if the company further increases its production capacity in the future, it will not only face an increased risk of spare capacity, but also face huge pressure on construction and equipment costs.

At the same time, Intel and SMIC are on a mission to strengthen semiconductor self-sufficiency in the U.S. and mainland China, respectively, and are working to expand production capacity. Intel is aggressively building new fabs in the U.S. and receiving substantial government subsidies, while expanding capacity in Europe, partnering with semiconductor companies in Japan and India, and acquiring Israeli foundry Tower. SMIC's capacity expansion is also in full swing at factories in Shenzhen, Shanghai and Beijing.

Chip demand for HPC, IoT, automotive, networking and applications continues to grow strongly, but the larger-than-expected scale of total capacity expansion in foundries and IDMs poses a question as to whether global manufacturing capacity will remain in short supply in 2023 and beyond, the sources added. main variable.