The author is an analyst of NH Investment & Securities. He can be reached at email@example.com. — Ed.
We believe that: 1) the chances of fab shutdowns at TSMC and UMC are minimal; and 2) SEC will resume operations at its Austin fab from April. Accordingly, we anticipate that semicon supply shortage issues will be resolved in 2H21.
Chances look low for fab shutdowns at TSMC and UMC
According to media reports, TSMC and UMC’s semicon output is under threat from drought-caused water shortages. As the two firms account for more than 60% of the global foundry market, disruptions at the companies could have major implications on production at IT device makers worldwide. The Taiwanese government has said that the country is facing the most severe water shortage in 56 years, owing to a lack of precipitation.
However, we expect the ongoing water shortage to have a limited impact on fab operations at semicon players. While reservoir levels for Hsinchu (located near TSMC’s fab) remain low, the situation appears better in the island’s northern region, including for the Shimen reservoir. Recently, TSMC has begun ordering water by truck from northern reservoirs to supply its fab. Of note, the Taiwanese government has pledged to beef up its support of water supply for semicon players. Also positive, Taiwan should soon enter its April rainy season.
Semicon supply shortage to ease in 2H21
We expect operations at Samsung Electronics (SEC)’s Austin foundry, which is temporarily closed due to a US cold wave, to resume in April. Amid normalizing power and water supply, facility inspections are being conducted. With wafer input likely to soon resume, operations should normalize in the next month.
Recently, a severe shortage of foundry facilities has been causing some disruptions in the production of IT set products (such as smartphones and automobiles) utilizing semiconductors. On Mar 17, SEC commented that its 2Q21 smartphone production could be negatively affected by global chip shortages. That said, we expect tight chip supply issues to be resolved gradually from 2H21, when: 1) operations return to normal at TSMC fabs in Taiwan and SEC’s Austin facilities; and 2) newly-expanded facilities at TSMC and SEC are set to commence full-fledged operations.