Exclusive: Taiwan Ministry Says TSMC Will Prioritize Auto Chips Where Possible

TAIPEI (Reuters) – Taiwan Semiconductor Manufacturing Co Ltd (TSMC) will prioritize the production of automotive chips if it is able to further increase its capacity, the Taiwanese Ministry of Economy told Reuters, in a context of global shortage that has hampered auto production.

A ministry official said Minister Wang Mei-hua spoke with company executives on Sunday about the matter.

TSMC had told the ministry that it would “optimize” the chip production process to make it more efficient and prioritize the production of automatic chips if it is able to increase its capacity further, the ministry said.

TSMC, the world’s largest contract chip maker, said current production capacity is full, but assured the ministry that “if production can be increased by optimizing production capacity, it will cooperate with the government to consider automotive chips as a main application ”.

TSMC, in a statement to Reuters, referred to comments by its CEO CC Wei during an earnings call this month.

“In addition to continuously optimizing the use of our existing capacity, Mr. Wei also confirmed at our investor conference that we are working closely with clients and moving some of their mature nodes to more advanced nodes,” where we have a better capacity to support them. ” the company said.

Germany has called on Taiwan to persuade Taiwanese manufacturers to help alleviate the semiconductor chip shortage in the automotive industry, which is hampering its nascent economic recovery from the COVID-19 pandemic.

The request was made in a letter to Wang from German Economy Minister Peter Altmaier.

The ministry said it would wait until it received the letter before deciding to contact TSMC again. Automakers around the world are closing assembly lines over semiconductor delivery issues, which in some cases have been exacerbated by the actions of the former Trump administration against major Chinese chip factories.

MANY AFFECTED CARMAKERS

The shortage has affected Volkswagen, Ford Motor Co, Subaru Corp, Toyota Motor Corp, Nissan Motor Co Ltd, Fiat Chrysler Automobiles and other automakers.

The ministry told Reuters it received requests from the United States and the European Union through “diplomatic channels” late last year, as well as from Germany and Japan this year.

He said that in the second quarter of last year, automakers reduced their orders to TSMC, which in turn transferred capacity to other customers, but in the second half of the year, demand for auto chips is returned.

“The Americans expressed their expectations late last year,” the ministry said.

“Right now, everyone is talking to each other through diplomatic channels, including TSMC. Everyone’s hands are tied with orders, but from a government perspective, we will try to help as much as we can for our important allies.

A senior official from Japan’s Ministry of Economy, Trade and Industry told Reuters that the Japanese Automobile Manufacturers Association and TSMC are already in contact, and the ministry has also contacted the de facto Japanese embassy. in Taipei to ask for his support in these talks.

The official added that it was mostly a private sector exchange, so the government is limited in what it can do.

In 2020, auto chips only accounted for 3% of TSMC’s sales, smartphones lagging 48% and 33% for high performance chips.

In the fourth quarter, TSMC auto chip sales jumped 27% from the previous quarter, but still only accounted for 3% of overall sales for the quarter.

A senior Taiwanese government official familiar with the issue told Reuters there was little he could do.

“They abandoned their orders for various reasons when demand was low in the midst of the pandemic. But now they want to increase their production. “