TSMC to invest $2.9 billion in advanced chip packaging plant in Taiwan

Taiwan Semiconductor Manufacturing Company plans to invest nearly $90 billion New Taiwan dollars (about $2.87 billion) in an advanced chip packaging plant in Taiwan, the company told CNBC on Tuesday.

It comes as global chipmakers seek to capitalize on the artificial intelligence boom. TSMC acknowledged last week that there is a strong demand for AI chips.

TSMC is the top producer of the world's most advanced processors, which include chips found in the latest iPhones, iPads and Macs.

The investment was sparked by "the rapid growth of the AI market" which has "driven a surge in demand for TSMC's advanced packaging," according to a report from Taiwan's official Central News Agency.

The facility will be located in Tongluo Science Park in northern Taiwan, TSMC said, adding the investment is expected to create about 1,500 local jobs.

"For AI, right now, we see a very strong demand. For the front-end part, we don't have any problem to support," said TSMC's CEO C. C. Wei during the firm's second quarter earnings report last week.

However, on the advanced packaging side, Wei said TSMC is experiencing "some very tight capacity."

"We are increasing our capacity as quickly as possible and we expect that these tightenings will be released next year, but in between, we're still working closely with our customers to support their growth," he said Thursday.

Packaging is one of the final stages of semiconductor production. It involves putting chips into a protective case and creating the connections for it to be put into an electronics device.

The Central News Agency reported that TSMC's packaging production capacity "is in short supply" as Nvidia and AMD compete for capacity. U.S.-based chip giants Nvidia and AMD are two of TSMC's largest clients.

TSMC's share performance

Nvidia buys high bandwidth memory chips that fit onto its latest A100 graphics processing units that train OpenAI's chatbot ChatGPT.

ChatGPT, an AI-powered language model, went viral for its ability to generate humanlike responses to users' prompts.

"As TSMC launches its advanced packaging expansion plan, the market is optimistic that Wanrun, Hongsu and Xinyun will benefit from the operation of equipment factories," the report said, referring to companies that manufacture chip-related equipment.

TSMC shares rose 1.97% on Tuesday in Asia.