By Stephanie Yang

TAIPEI -- Taiwan Semiconductor Manufacturing Co., a major chip supplier to Apple Inc., said it would invest $100 billion over the next three years to increase production capacity as demand surges.

The investment builds on a record annual capital-expenditure budget for the world's largest contract chip maker, at a time when chips are in short supply around the world. In a statement, the company said it expects strong demand over the next several years, a trend driven by growth in 5G and high computing capabilities and accelerated by the Covid-19 pandemic.

"TSMC is working closely with our customers to address their needs in a sustainable manner," the company said Thursday.

In January, TSMC said it would spend $25 billion to $28 billion on developing advanced chips and building plant capacity in 2021.

Other chip makers are also pouring money into increasing capacity. Intel Corp. recently said it would spend $20 billion on two new chip factories in the U.S., starting in 2024. The semiconductor giant had lagged behind competitors such as TSMC and Samsung Electronics Co. in market share and technology capabilities, leading to the ouster of Bob Swan as chief executive.

Samsung plans to invest about $116 billion by 2030 to further diversify its semiconductor production. Globalfoundries Inc., a major U.S.-based contract chip maker, has said it is doubling its capital investment this year to boost capacity.

Semiconductors are an important component in many consumer goods from phones to cars, and the pandemic created new demand for electronics such as work-from-home equipment and gaming consoles. As a result of the supply constraints, auto manufacturers such as Ford Motor Co. and Volkswagen AG have halted production of vehicles that use chips for functions such as engine management, automatic braking and assisted driving.

The shortage has also highlighted the supply chain's dependence on TSMC and Taiwan's semiconductor industry. President Biden's $2.3 trillion infrastructure plan included $50 billion for the U.S. semiconductor industry in an effort to mitigate reliance on overseas suppliers.

TSMC said last year, in a decision praised by the Trump administration, that it would invest $12 billion to build a chip factory in Arizona with the support of the federal and state government. The two factories that Intel announced in March will also be built in Arizona.

Write to Stephanie Yang at stephanie.yang@wsj.com

(END) Dow Jones Newswires

04-01-21 0910ET