TSMC to Set Up $7 Billion Japan Plant With Help From Sony

(Bloomberg) -- Taiwan Semiconductor Manufacturing Co. will build a $7 billion fabrication plant in Japan, with a subsidiary of Sony Group Corp. becoming a minority shareholder in the venture. 

The new factory comes during a persistent chip shortage, which has hit a wide range of global industries. Governments around the world have been racing to bolster their domestic chip manufacturing capabilities, in part by attempting to entice TSMC and its South Korean rival Samsung Electronics Co. with financial incentives. 

TSMC’s board approved on Tuesday an initial investment of up to $2.12 billion to create a Japan-based subsidiary, the Taiwanese chipmaker said a statement. Sony Semiconductor Solutions Corporation will invest $500 million in the subsidiary, which will represent a less than 20% equity stake. 

The new venture has “strong support” from the Japanese government, the two companies added in a joint statement on Tuesday. It did not specify how Tokyo will offer its support, though Prime Minister Fumio Kishida said last month his government will set aside funding in the next economic stimulus package due by year-end.

“While the global semiconductor shortage is expected to be prolonged, we expect partnership with TSMC to contribute to securing a stable supply of logic wafers, not only for us but also for the overall industry,” Terushi Shimizu, president and chief executive officer of Sony Semiconductor Solutions Corporation, said in the joint statement. 

Sony shares were little changed in early Tokyo trading. 

The initial capital expenditure is estimated to be approximately $7 billion. Construction of the TSMC fab is set to begin in 2022 with production expected to start by the end of 2024. The chip plant is expected to create about 1,500 jobs with a monthly capacity of 45,000 12-inch wafers initially made with mature 22- and 28-nanometer technologies. 

Citi analyst Kota Ezawa called the development “slightly positive” for Sony in a research note. The new facility will diversify the company’s procurement options and provide geographic advantages, but at some additional cost.

“Recent developments like geopolitical risks and tight supply conditions may have been key reasons behind TSMC’s decision to build a new chip plant in Japan, but it might also be fair to say that maintaining the existing format might no longer be the best option,” Ezawa wrote.

The new plant is positive for Japan’s chip industry in expanding its advanced logic capabilities, LightStream Research analyst Mio Kato wrote in a note on Smartkarma. It may also help TSMC bolster relationships with Japanese clients, such as Sony and Renesas Electronics Corp.

In addition to the new Japan venture, TSMC is now building a $12 billion fabrication plant in Arizona, and is also mulling over the possibility of creating a new factory in Germany. 

Separately, TSMC will build a facility to produce 7-and 28-nanometer chips in the southern Taiwanese city of Kaohsiung --  the company’s first plant in the city -- spokeswoman Nina Kao said Tuesday. Construction will begin in 2022 with production expected in 2024.

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