The ongoing shortage of automotive chips will be greatly reduced starting the second quarter of 2021, according to pure-play foundry TSMC.

TSMC in January expressed its commitment to supporting its automotive clients, said company CEO CC Wei at an April 15 earnings conference call. Along with its productivity improvement, the foundry expects automotive chip supply to its customers to greatly improve by the next quarter.

Wei indicated that it takes at least six months from chip fabrication to car production. "TSMC is doing its part to address the chip supply challenges for our customers," Wei said.

TSMC has seen its fabless clients maintain healthy inventory levels, said company CFO Wendell Huang. Nevertheless, amid the lingering macro and supply uncertainties, Huang noted, "we expect our customers and the supply chain to gradually prepare higher levels of inventory throughout the year as compared to the historical seasonal level."

"We expect this to persist for a period of time," Huang continued, given the industry's continued need to ensure supply securities.

"We cannot rule out the possibility of an inventory correction or overbooking," said Wei during a Q&A session at the earnings call yesterday. TSMC continues to see strong demand from its clients that may persist into 2022, according to Wei.

TSMC along with other foundries have experienced tight capacity that will persist throughout this year, said Wei, adding that the tight capacity should be able to ease in 2023 when new fabs and production lines come online.

TSMC at the earnings call also talked about the impact of a serious drought in Taiwan. "TSMC has a long established enterprise risk management system in place, which cover water supply risk as well," Wei noted. The company does not expect to see any material impact of the matter on its operations.

TSMC has raised its global semiconductor market outlook for 2021 to around 12% growth, while revising its foundry market growth forecast to about 16% from the previously estimated 8%. TSMC expects to post a 20% revenue surge in US dollar term this year.