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TSMC announces chip plant in Japan, flags 'tight' capacity throughout 2022
* Q3 profit T$156.3 bln vs T$149 bln market forecast
* Q3 revenue up 22.6% on year in U.S. dollar terms
* TSMC lifts 2021 revenue growth target to about 24%
* Japan factory to start production by late 2024

By Yimou Lee and Ben Blanchard
October 14, 2021 4:11 PM +07

TAIPEI, Oct 14 (Reuters) - Taiwan chip giant TSMC (2330.TW) announced on Thursday plans to build a new factory in Japan to meet long-term appetite for chips and said, near-term, tight supplies will likely continue into 2022 amid booming demand during the COVID-19 pandemic.

TSMC, the world's largest contract chipmaker and a key supplier to Apple Inc (AAPL.O), said it would set up a chip plant in Japan that will use older chipmaking technology, a segment currently under a severe supply shortage due to robust demand from automakers and tech companies. But production from the plant is only likely to begin by late 2024.

The company and Taiwan in general have become central in efforts to resolve a pandemic-induced global chip shortage, which has forced automakers to cut production and hurt manufacturers of smartphones, laptops and consumer appliances.

"TSMC is working closely with our customers to plan our capacity and investing in leading edge and speciality technologies to support their demand," Chief Executive Officer C. C. Wei told an online earnings briefing, after the company posted higher-than-expected profits in the third quarter.

He said the expansion plan in Japan was pending approval from the company's board and declined to disclose details such as expenditure and capacity.

TSMC posted a net profit of T$156.3 billion ($5.56 billion) in July-September, well above the T$149 billion average of 22 analyst estimates compiled by Refinitiv. That was 13.8% higher than the same period of last year.

Advanced chips made by TSMC, formally known as Taiwan Semiconductor Manufacturing Co , are used in everything from high-end smartphones like Apple's newly unveiled 5G iPhone 13, to artificial intelligence, cars and a wide variety of lower-end consumer goods.

Wei said TSMC's capacity will remain "tight" this year and throughout 2022, adding its chip pricing will "remain strategic not opportunistic to reflex our value creation".

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Hi does anyone know:

1. How much are TSM ADR pass through fees?

2. How much withholding tax a Sg investor pays off TSM's dividends?

Thks in adv
This position size could also be a bet made by Buffett's 2 lieutenants. Recently, I heard a podcast that says even Apple is unable to stop TSMC from raising its prices!

The history of the Intel-AMD rivalry (when AMD still had fabs) may reveal some ideas of what is to come for TSMC's future. In wafer fabrication, economies of scale matters a lot and a virtuous cycle of able to spread your R&D costs over higher volume --> more money for R&D --> better technology edge --> lower prices/higher yields --> more customers --> more revenue --> spread over bigger volume --> more more money for R&D...

This cycle will and can continue.....until the the incumbent leader makes a huge mistake, or there is a fundamental change in your customer's behavior that weakens your business model.

Buffett bets US$5b on chipmaking with new stake in TSMC

TSMC, which has taken over from Intel as the firm advancing the cutting edge of chipmaking, has also emerged as a strategically vital player at a time when the US and China have clashed over leadership in the global technology industry. Taiwan’s most valuable company has the manufacturing prowess to make the world’s most advanced chips, instrumental to advancing every nation’s future commercial industries like EVs and AI but also feeding their military and cyber defence ambitions. The US has imposed elevated sanctions on high-end chips produced for Chinese customers specifically to forestall them making their way into the hands of the Chinese military.
The irony of Intel-AMD rivalry is actually AMD stopped foundry capex as it ran out of cash and moved to TSMC while selling their foundries to Global Foundries. Forced by circumstances turned out to be blessing in disguise. The other way to look at it is Intel thought AMD is the competitor...

On another note:
Some may think the TSM purchase may have come from one of Buffett's younger lieutenants, Todd Combs or Ted Wechsler. However, if that's the case, it would be the largest of their positions, as every allocation larger than TSM in Berkshire's portfolio is a Buffett purchase. Thus, there's a good chance the TSM buyer is Buffett himself.

It's quite possible Buffett found TSM from his position in Apple. After all, TSM produces Apple's Bionic iPhone processors and M series laptop chips, so Buffett likely came to appreciate TSM's market position and pricing power through the Apple position. In October, the website MacRumors reported that even Apple had reluctantly accepted TSM's most recent price hike, after initially pushing back. According to Taiwan's Economic Daily News, "At present, not one of the IC design factories that received the price increase notice has refused."
Agree. Probably Buffett himself given the size. TSMC is the most traditional pseudo monopoly company (>53% market share;, great unit economics (>50% gross margin, 30-40% net margin), and great moat (hard for competitors to replicate decades of yield optimization, technological know-how, customer relationship, economies of scale). Selling at 16x PE. Why wouldn't Buffett like it?