TSMC Shares Soar On Profit Estimates And Japan Factory Deal

Shares in Taiwan's microchip giant TSMC soared on Friday forecasting, posting better-than-expected profits for the rest of the year and following the announcement of plans to build its first factory in Japan.

The world is in the midst of a severe shortage of silicon microchips that are used in everything from cars and missiles to phones and games consoles.

Taiwan Semiconductor Manufacturing Company (TSMC) operates the world's largest silicon wafer factories and produces some of the smallest -- and most advanced -- microchips.

On Thursday the tech giant said it expected as much as $15.7 billion in revenue for the fourth quarter, higher than analyst estimates, as demand for chips remained strong.

Net income in the third quarter rose a forecast-topping 14 percent to $5.6 billion.

The news was music to the ears of investors, with TSMC's share price rising 4.7 percent in Taipei.

TSMC's factories are already operating at full capacity and the company warned production will likely remain stretched next year.

"We expect TSMC's capacity to remain very tight in 2021 and throughout 2022," Chief Executive Officer C.C. Wei said on a conference call.

"While the short-term imbalances may or may not persist, we believe our technology leadership will enable TSMC to capture the strong demand for our advanced and speciality technologies," he added.

Demand for chips made by Taiwan Semiconductor Manufacturing Company has soared as the global economy reopens AFP / Sam Yeh

With so much of TSMC's production concentrated in Taiwan, many countries have been wooing it to build foundries in their territories.

The company has already pumped billions into building a state-of-the-art foundry in Arizona and on Thursday said it would construct its first factory in Japan.

Work will begin next year and is being part financed by the Japanese government with hopes the plant will start producing chips by late 2024.

Japan's Prime Minister Fumio Kishida told a news conference Thursday evening that the deal would "improve the independence of our country's semiconductor industry and contribute considerably to our economic security".

"We will add support for TSMC's large-scale private investment to our economic plans," Kishida added.

Japan's Asahi daily said Friday that the Japanese government was considering financial support worth some 500 billion yen ($4.4 billion) for the factory plan.

The aid is likely to be part of this fiscal year's supplementary budget, the newspaper said, adding companies such as Sony and auto parts maker Denso may cooperate in TSMC's operation in Japan.

Globally the chip shortage has hit a range of industries, particularly computer, smartphone and car manufacturers.

European new car sales fell to their lowest level for a month of September since 1995 as a global shortage of semiconductors hit supply, industry data showed on Friday.