According to sources familiar with the matter, Vanguard International Semiconductor (VIS), an affiliate of Taiwan Semiconductor Manufacturing Co. (TSMC), is nearing a decision to construct its most advanced chip plant in Singapore. VIS, a specialty contract chipmaker in which TSMC owns a 28.3% stake, aims to meet the demand for automotive-related chips by building its first 12-inch chip plant. The move is driven by the increasing demand for mature chip supplies for the electrification of cars and other electronic devices, as well as the need to have production capacity in different locations to address geopolitical tensions and customers' requirements.

The investment in Singapore will be VIS's largest in years, with sources estimating it to be at least $2 billion. The company's capital expenditure for this year is expected to be less than NT$10 billion ($309 million), compared to NT$19.4 billion in 2022. While VIS has only operated 8-inch chip facilities that produce mature chips, the new 12-inch plant will focus on mature and long-lasting chips for automotive and industrial applications.

The proposed plant will be located near the 8-inch chip plant in Tampines, Singapore, which VIS acquired from GlobalFoundries in 2019. The site is in close proximity to Systems on Silicon Manufacturing Co. (SSMC), a plant jointly owned by NXP and TSMC. This strategic location offers advantages in terms of supply chain collaboration and proximity to other semiconductor players in the region.

United Microelectronics Corp. (UMC), Taiwan's second-largest contract chipmaker, is also building a $5 billion plant nearby. GlobalFoundries and Applied Materials are pursuing expansion plans in Singapore as well.

The expansion into Southeast Asia aligns with TSMC's broader strategy of diversifying its production to meet customer demands for a more resilient supply chain. VIS Chairman Leuh Fang, having experience operating plants in Singapore during his tenure as Vice President of SSMC, views Singapore and Japan as ideal locations for expanding market share in the global chip industry. However, limited resources such as land, water, and electricity pose challenges for Singapore's growth as a semiconductor manufacturing hub.

VIS stated that it is exploring various expansion possibilities and declined to provide further comments as it is currently in the quiet period before quarterly earnings.