Foundry capacity will remain tight as customers continue stockpiling chips and semiconductor demand ramps throughout 2022, warned Taiwan Semiconductor Manufacturing Co. (TSMC) CEO C.C. Wei on this week’s fourth quarter of 2021 earnings call.

“We continue to observe the structural increase in long-term semiconductor demand, underpinned by the industry megatrend of 5G and HPC-related applications,” he said. “We also observe higher silicon content in many end devices, including automotive, PCs, servers, networking, and smartphones.”

To mitigate these trends, TSMC is aggressively expanding its foundry capacity to the tune of $40 billion to $44 billion in 2022, up from $30 billion last year. Of that, 70-80% will go toward advanced process technologies, including the foundry operator's upcoming 2-nanometer and 3-nanometer manufacturing processes, CFO Wendell Huang said.

TSMC last spring pledged $100 billion over the next three years to combat the global chip crunch. It now appears TSMC is front loading many of those investments.

Despite these efforts, Daniel Clarke, thematic research analyst at GlobalData, expects TSMC will remain a chokepoint for the global tech economy in the new year. However, increased capacity in the U.S. and Europe could ease capacity challenges, he noted.

“GlobalData estimates that the global chip shortage will continue long into 2022, but will improve in [the second half of the year] as U.S. and European semiconductor firms increase their capacity,” he wrote in a research note this week.

On the earnings call, Wei provided an update on the foundry’s upcoming 3-nanometer process node, which he said is on track to begin production in the latter half of 2022.

For the release, TSMC is sticking with the more mature FinFET transistor design rather than the newer gate-all-around design planned for use in Samsung’s competing 3-nanometer process.

“Our N3 technology development is on track,” Wei said. “We have developed complete platform support for both HPC and smartphone applications.”

And despite a higher cost over its 2020 5-nanometer process, Wei expects the new process will see stronger adoption.

TSMC’s revenues rocketed to $15.74 billion in Q4, up 24% year over year and 5.8% over the prior quarter. The company also realized a net income of $5.9 billion, up 16.5% over the year prior.

TSMC’s most advanced 5-nanometer manufacturing process accounted for roughly 23% of total wafer revenues during the quarter, while the company’s more mature 7-nanometer process, widely used by chipmakers like AMD, accounted for 27% of sales, the company said.

Looking back at full-year 2021, TSMC banked $21 billion in net income on $56 billion in revenue. These gains were propelled by strong growth across the foundry operator’s entire footprint, which saw high-performance compute, IoT, and automotive revenues up 34%, 21%, and 51%, respectively over the past four quarters.

Looking ahead to 2022, the company forecasts Q1 revenues of $16.6 billion to $17.2 billion.