“They could benefit directly from production ramp-ups to meet demand. Wafer fabrication equipment spending is projected to swell to US$60 billion – US$70 billion in 2021, up 20-40% from 2020 levels. Lam Research’s new etching tool, 'Sense.i,' is equipped with intelligent sensors. This can potentially reduce defect rates and chip costs, providing a competitive edge against peers,” he adds. TSMC, a semiconductor manufacturing company in Taiwan, is another “ostensible beneficiary” of the shortage in chips. “With overwhelming orders, TSMC may prioritise manufacturing space for higher-margin products such as gaming processors. It also intends to raise automotive chip pricing by 15%, citing global shortages,” says Yeap. TSMC says it expects to spend around $25 billion to $28 billion in 2021 to make advanced chips, 45% to 63% higher than $17.2 billion in 2020, which points to longer-term growth opportunities. That said, Yeap believes that a “quick fix” in the near-term should not be expected, as expanding production capacity may take months or years. “The lead time from equipment orders to actual output is estimated to be 9-12 months. We also expect Biden’s tough policy on China to stand. This implies that production constraints could continue to weigh on chipmakers’ sales potential through 2021,” he writes. However, Yeap feels a backlog in orders – once production ramps up over time – should lift sales.
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The above factors, he says, may potentially increase the automobile sector’s share of semiconductor demand to 11% from 8.3% by 2025. In computing, Yeap sees that the strong demand for computers as at end-2020 will spill into 2021.