TSMC plans to spend $100 billion on advanced chips amid shortage

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Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) announced plans to invest $100 billion in advanced chips over the next three years to combat the chip shortage. For comparison, the Asian tech giant only planned to spend $25 billion to $28 billion on advanced chips this year. TSMC spent $17 billion on manufacturing advanced chips last year.

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TSMC battles chip shortage

TSMC's statement comes just days after Intel Corporation (NASDAQ:INTC) announced plans to invest $20 billion in expanding its capacity for making advanced chips. TSMC is the largest contract chipmaker in the world. It counts Apple Inc (NASDAQ:AAPL) and Qualcomm, Inc. (NASDAQ:QCOM) among its customers.

Global companies have been dealing with a shortage of semiconductors for months, which forced automakers to reduce production. However, the damage has now spread to smartphone, laptop and appliance makers as the pandemic drives an increase in demand.

TSMC told CNN Business in a statement that it will use the $100 billion to "increase capacity to support the manufacturing and [research and development] of advanced semiconductor technologies." The world's chipmakers are pushing to expand their semiconductor fabrication capacity to meet the strong demand that triggered a worldwide chip shortage.

Pandemic drives increased demand

TSMC told Reuters in a statement that the world is "entering a period of higher growth as the multiyear megatrends of 5G and high-performance computing are expected to fuel strong demand for our semiconductor technologies in the next several years." The company added that the pandemic has been accelerating digitalization.

TSMC and other tech companies have benefited from the work-from-home trend during the pandemic, as consumers bought tablets, laptops and other equipment. According to Fox Business, the company announced plans to construct a $12 billion plant in Arizona in a win for former President Donald Trump, who pushed to bring jobs back to the U.S., especially in tech supply chains.

Earlier this month, Intel announced plans to build two plants at its Arizona campus to make chips, both for itself and for outside customers as a foundry business model.

Shares of TSMC rose by about 5% on the New York Stock Exchange, while Intel stock was down less than 1%.