TSMC to Invest Up to $44 Billion in 2022 to Beef Up Chip Production

As a pandemic-fueled surge in demand for various devices requiring semiconductors has created widespread shortages, major chip makers have been on an investment spree to raise production capacity.

TSMC,

Samsung Electronics Co.

and

Intel Corp.

—three of the world’s biggest chip makers—accounted for nearly three-fifths of $146 billion that semiconductor companies around the world spent in 2021 to build new production capacity and develop new technologies, according to an estimate by research firm Gartner Inc.

Demand from sectors like high-performance computing devices and automotives would keep the company’s manufacturing capacity utilized at a high rate, TSMC’s Chief Executive C.C. Wei said in an quarterly earnings call on Thursday.

The trend of various products or sites, such as cars or data centers, using more semiconductors will continue to drive demand for TSMC’s chips, Mr. Wei said. “In many devices, it is increasingly the silicon content that is a more important factor in supporting strong semiconductor demand,” he said.

This year, TSMC’s revenue is likely to grow by at least around 25% from a year earlier, he said. That would outperform the average growth pace of about 20% that TSMC forecasts for the contract-chip-making industry, known as foundries, he said.

About half of the company’s chip sales comes from the advanced technology semiconductors that it produces for its clients, including

Apple Inc.

TSMC is now increasing investments into capacities to build less-advanced chips based on older production technologies. Those chips, widely used in cars, smartphones and other devices, became a supply chain bottleneck last year, including for Apple.

Mr. Wei called such products a “sweet spot” for the company’s longer-term strategy. Production lines for these less-advanced chips aren’t as expensive, while TSMC’s technology to build these chips are specialized, making it hard for rivals to replace those semiconductors, industry experts say.

TSMC said revenue from its automotive-related operations, which grew by 51% last year from a year earlier, is expected to be among its fastest-growing business this year. The auto sector is among the hardest hit from global chip crunch.

TSMC increased its auto chip production by about 60% in 2021, but it still only accounts for 4% of its annual revenue. Around 44% of its revenue comes from the smartphone business.

Some analysts have raised concerns over possible overcapacity for less advanced chips, but Mr. Wei said that he is confident the company can avoid that given the robust demand for its semiconductors.

Hsinchu, Taiwan-based TSMC is building a new $12 billion plant in Phoenix and a $7 billion plant in southern Japan. It has also said it plans to expand capacity in the eastern Chinese city of Nanjing, as well as in Taiwan. The company is currently assessing the feasibility of a new fabrication plant in Europe, Chairman

Mark Liu

said on the call.

Rivals are also aggressively expanding capacity. Samsung Electronics announced a $17 billion investment in Taylor, Texas, in November, while Intel recently pledged to build new chip-making facilities in Europe valued at up to $95 billion.

In 2021, TSMC posted a record revenue of 1.59 trillion New Taiwan dollars, equivalent to $57 billion, up 18.5% from a year earlier. Its fourth-quarter net profit rose 16.4% from the same period a year earlier, driven by strong demand from 5G applications, high-performance computing devices, and automotive electronics.

For January-March, TSMC said it expects to post revenue between US$16.6 billion and US$17.2 billion, up 28% to 33% from the same period a year ago.

—Kosaku Narioka contributed to this article.

Write to Yang Jie at jie.yang@wsj.com