Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest contract producer of advanced chips, said on Thursday it will press ahead with its 28-nanometre fab expansion in Nanjing, defying speculation that the project could be affected by US-China tech rivalry. “We are further expanding our presence in Nanjing with 28-nm technology to support our customers’ urgent needs,” Mark Liu, chairman of TSMC, said during a conference call with analysts on Thursday. “The volume production will begin in the second half of 2022, reaching 40,000 wafers per month capacity by mid-2023.” Liu said the 28-nm line will be “the sweet spot for our embedded memory applications” and he expects structural demand for 28-nm to be strong. The Nanjing fab, one of two that TSMC owns in mainland China, completed construction in 2017. It now has a monthly capacity of 25,000 wafers produced using 16-nm technology, after the Phase I volume ramp-up finished in the third quarter of 2020 to meet strong demand from the mainland Chinese market, according to Liu. After TSMC announced its plan to spend US$2.87 billion to expand the Nanjing plant, the project has stirred controversy in both Beijing and Taipei. Some Taiwan lawmakers questioned whether the development could increase risks of technology transfer from Taiwan to the mainland. China’s semiconductor output hits record in June with support from Beijing In Beijing, there were even voices calling for a boycott of the project, arguing that TSMC was moving older 28-nm technology to the Chinese mainland while building a leading edge 5-nm fab in the US state of Arizona. Liu said on Thursday that newly-hired engineers for the US fab arrived in Taiwan in late April for training on 5-nm technology. Construction of the Arizona fab has already begun, with equipment expected to be installed in the second half of 2022. Phase one volume production of 20,000 wafers per month using 5-nm technology will begin in the first quarter of 2024, Liu added. Separately, TSMC said it is in talks to build its first ever chip facility in Japan, without elaborating. “Considering that Japan has major customers such as Sony and Renesas Electronics, it is very likely that TSMC will go ahead with the plan in Japan,” said Eric Tseng, chief executive of Taipei-based research firm Isaiah Research. Liu said TSMC’s home base for leading technology nodes will remain in Taiwan. The Hsinchu, Taiwan-based company, which controls more than half of the world’s foundry output, reported US$13.29 billion in revenue for the second quarter, an increase of 28 per cent year on year, thanks to robust demand from high performance computing and automotive applications. In the second quarter, shipments of 5-nm and 7-nm products accounted for 18 per cent and 31 per cent of its total wafer revenue, respectively. Advanced technologies, defined as 7-nm and below, accounted for 49 per cent of the total, TSMC said. The better-than-expected revenue came after operations at the chip making giant were threatened by a recent surge of Covid-19 in Taiwan, which followed earlier setbacks that included an island-wide water shortage and a power outage in April at its Fab 14 in Taiwan. TSMC’s shares rose 0.16 per cent to NT$614 on the back of its latest results. TSMC chief executive C C Wei said during the earnings call that he expects the company’s capacity to remain tight throughout 2021 and even into 2022. On the car chip shortage, Wei said TSMC’s output of microcontroller units, an important component used in high volumes by carmakers, grew by about 30 per cent in the first half compared to the same period in 2020. TSMC also outlined its plan to spend US$100 billion over the next three years to expand its capacity to capitalise on future growth opportunities driven by demand for 5G and high performance computing applications.