TSMC’s board approves $1.4 billion capacity expansion plan

TAIPEI, Taiwan — Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), the world’s largest contract chip maker, announced Tuesday that the company’s board of directors had approved an appropriation of $1.4 billion for future expansions of production capacity at its manufacturing plants.

The funds will be mainly used for future expansions of manufacturing capacity for production using 130-nanometer and 90-nanometer processes at TSMC’s two 300-millimeter chip fabrication plants (fabs) in Taiwan, including one that is scheduled to begin commercial production next year, the company said. Some funds will also be used to expand production capacity for 180-nanometer and 150-nanometer processes at some of the company’s 200-millimeter fabs, it said.

Tuesday’s announcement does not change TSMC’s capital expenditure (capex) plans for 2003, said J.H. Tzeng, a spokesman for the company in Hsinchu, Taiwan.

“This appropriation doesn’t mean this amount will be spent this year or next year,” Tzeng said.

At TSMC’s third-quarter earnings conference in October, the company released a statement noting that capex for the first nine months of 2003 amounted to $706 million and would total $1.2 billion for the entire year.

The $1.4 billion spending plan announced Tuesday covers funds that will be spent on expansion over the next few years and is not an indication of the company’s 2004 capex plans, Tzeng said. TSMC’s capex plans for 2004 are expected to be announced early next year.

Demand for chips made using the most advanced process technologies, including 130-nanometer and 90-nanometer processes, have helped TSMC to recover from a slowdown in the chip sector that has lasted for more than two years. The company’s third-quarter net income increased 380 percent to NT$15.2 billion ($449 million), up from NT$3.2 billion during the same period last year.

As profits have risen, so has TSMC’s utilization rate. The company said its capacity utilization rate hit 98 percent during the third quarter, up from 88 percent during the second quarter. Looking to the fourth quarter, TSMC has estimated that the utilization rate will be around 95 percent as planned increases in capacity run ahead of an expected increase in demand.