TSMC and Intel Hit the Brakes on Japan, Malaysia Expansions

Leading chipmakers, including Taiwan Semiconductor Manufacturing Co. (TSMC) and Intel, are slowing down their expansion plans in Japan and Malaysia, Nikkei Asia reports. The slowdown is attributed to sluggish demand for older chips and lingering uncertainties surrounding tariffs.

TSMC, the world's largest chipmaker, is delaying the installation of equipment for 16-nanometer and 12-nanometer chip production at its Kumamoto, Japan, facility until 2026. This decision reflects weaker-than-expected demand for mature chips used in various applications, including smartphones, cars, and industrial equipment.

"The demand for consumer electronics and automotive and industrial applications is not very good, and the recovery does not yet look promising," a chip executive told Nikkei Asia. "Thus, it's not urgent to massively expand at this point. ... The current utilization rate at TSMC's Kumamoto plant is much lower than expected."

The Kumamoto plant, TSMC's first overseas facility, was initially viewed as a success story, starting production ahead of its Arizona plant despite being constructed later. However, the current slowdown highlights the challenges of navigating the global semiconductor market.

Intel, another major player, has also put its expansion plans in Malaysia on hold, delaying the installation of equipment at its advanced chip packaging facility. This decision is linked to softening demand for computers and Intel's own financial struggles.

"The building of the plant has been completed, but Intel put on hold the plan to install equipment," a source familiar with the situation told Nikkei Asia.

Chip packaging companies Advanced Semiconductor Engineering (ASE) and Siliconware Precision Industries (SPIL), both major suppliers to the automotive and industrial sectors, are also slowing their expansions in Malaysia, citing weaker-than-expected demand. Both companies are prioritizing expansion in Taiwan to meet the growing demand for advanced AI chips.

TSMC is similarly focusing on expanding its cutting-edge chip production in Taiwan and the United States.

Increased chip production in China, aimed at localizing the semiconductor supply chain, is also contributing to the slowdown in mature chip capacity expansion in Malaysia and Japan.

The slowdown is impacting not only major chipmakers but also their suppliers. Intel suppliers, such as chip substrate maker AT&S, have also slowed their expansion plans in Malaysia. Kinsus Interconnect Technology, a chip substrate supplier to Nvidia and AMD, has halted its planned factory construction in Penang due to geopolitical uncertainties and weak demand.

"Kinsus had plans, but the risk is too high for overseas expansion at this moment," a senior source with direct knowledge of the company told Nikkei Asia. "Staying put is a better strategy than making a move."

Despite the slowdown in the automotive and consumer electronics sectors, data center supply chains continue to expand rapidly in Malaysia, driven by robust demand in Southeast Asia.

Analysts predict a slow recovery in the automotive and industrial sectors, potentially extending into 2025. Unfavorable global macroeconomic conditions, China's focus on using locally sourced chips, and uncertainty surrounding US tariff policies are contributing to the hesitancy among businesses to invest.

TSMC, Intel, and Kinsus have all issued statements to Nikkei Asia, reiterating their long-term commitments to expanding production in Southeast Asia, but emphasizing that the current economic climate necessitates a cautious approach to investment and scheduling.