Taiwan Semiconductor Manufacturing Company (TSMC) is looking to expand its 8-inch fab capacity to meet strong chip demand for automotive electronics, IoT and industrial automation applications.

TSMC plans to build a new 8-inch wafer fab at its manufacturing site in Tainan, southern Taiwan to satisfy robust customer demand for specialty process technologies, said company CEO CC Wei, without elaborating further.

Industry sources believe that the additional 8-inch fab capacity at TSMC is to fulfill a ramp-up of orders for analog chips, LCD driver ICs, MOSFET chips, sensors and MCUs.

TSMC has long been seeing its 8-inch fab supply fall short of demand, and expanding the fab capacity is necessary for the company to keep relationships with its 8-inch fab customers mainly Taiwan-based ones, the sources noted. The foundry is expected to see a return of some previous customers in the first quarter of 2019, the sources continued.

In addition, with Vanguard International Semiconductor (VIS) reportedly set to discontinue its partnership with TSMC in the second quarter of 2019, TSMC will need more 8-inch fab capacity to fulfill orders, the sources said. TSMC has long been transferring orders such as those for LCD driver ICs demanding 8-inch wafer process capacity to VIS when its own 8-inch fabs have been fully occupied.

TSMC is expected to have its new 8-inch fab capacity come online after 2020, according to the sources.