TSMC to issue NT$13.9 billion in bonds to fund production expansion

Taipei, July 4 (CNA) Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chipmaker, will issue NT$13.9 billion (US$470 million) in unsecured bonds soon to help fund its plan to expand production capacity.

In a filing on the Taiwan Stock Exchange (TWSE) Friday, TSMC said the bonds will comprise three tranches -- NT$5.7 billion payable over 5 years, NT$6.3 billion over 7 years, and NT$1.9 billion over 10 years.

The interest rates will be 0.58 percent on the five-year bonds, 0.65 percent on the seven-year ones, and 0.67 percent on the 10 year tranche, TSMC said.

Capital Securities will serve as the main underwriter in the bond sale, TSMC said, but did not disclose when exactly the bonds will be issued.

If launched by the end of the month, as markets analysts have predicted, the unsecured bond sale will be TSMC's second this year.

In the first half of the year, TSMC sold NT$60 billion in unsecured bonds, which it said would be used to finance the expansion of its 5 nanometer wafer plant in the Southern Taiwan Science Park in Tainan.

As part of its business expansion plan, the chipmaker said, it planned to issue another NT$60 billion in bonds in the second half of the year, including the NT$13.9 billion announced Friday.

According to market analysts, the funds from TSMC bond sales in the second half of the year will also be invested in its 5nm chip production, the latest technology the company has in mass manufacturing.

Currently, TSMC is working on 3nm chips, which are expected to start commercial production in Tainan in 2022, and also on the more advanced 2nm process.

In addition to TSMC's spending on production expansion, it is also investing heavily in research and development, which increased by an annual 4 percent in 2019 to almost US$3 billion, according to analysts.

This year, the chipmaker is expected to spend between US$3.37 billion and US$3.52 billion on research and development, amid rising demand for emerging technologies such as 5G applications and high performance computing devices, they said.

According to the TWSE, TSMC had US$430.78 in cash and cash equivalent as of the end of March, compared with NT$455.40 billion at the end of last year.