Apple Supplier TSMC On How Repeat Of Crippling Chip Shortage Can Be Avoided In Future - Taiwan Semiconductor (NYSE:TSM)

Taiwan Semiconductor Manufacturing Co TSM said the automotive industry needs to modernize its “Just-in-time” supply chain practices to avoid a similar semiconductor shortage as the ongoing one in the future, Reuters reported Friday.

What Happened: The world’s largest chipmaker has significantly increased 2021 output for a key automotive semiconductor component amid the ongoing global chip shortage, the report said.

TSMC managed to increase output for MCUs (microcontrollers) by 60% over the 2020 level, which when compared with the pre-pandemic level is a 30% increase over 2019, the report said.

In the first quarter, sales for TSMC’s auto chips jumped 31% from the previous quarter, representing only 4% of overall sales.

TSMC is among the growing voices advocating that it is time for the industry to modernize the just-in-time auto supply chain model first adopted by Toyota Motor Corp TM decades ago which later became an industry standard.

Chip equipment maker Applied Materials Inc AMAT on Thursday warned the current capacity shortfalls reflect how the highly efficient, just-in-time practice to fill scarcity may not be effective going forward.

Why It Matters: The global chip shortage has forced automakers across the world to halt production lines and the shortage is now impacting consumer electronics as well including Apple Inc AAPL, a key client for the Taiwan-based TSMC.

President Joe Biden had sought a $50 billion congressional funding to drive U.S. semiconductor production and research. U.S. Commerce Secretary Gina Raimondo on Thursday held meetings with industry leaders to discuss the semiconductor shortage and said the U.S. could help boost transparency in the market.

Price Action: TSM shares closed 0.78% higher at $1130.28 on Thursday.

Photo by iphonedigital on Flickr

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