Taiwan Semiconductor Manufacturing Company (TSMC) only builds capacity to meet the needs of its customers, and the company's advanced processing technology also encourages it to ramp up new capacity, according to chairman and CEO Morris Chang.

Without orders, and technological capabilities that attract business, TSMC would not decide to carry out its expansion plans, Chang indicated. Besides, well-built relationships with clients are another credit to TSMC's business, which will be able to go through challenges that lie ahead and still enhance its competitiveness during difficult times, Chang said.

You cannot just go ahead and expand capacity without taking into account customer demand and abilities necessary for the expansion, Chang further noted.

Chang made the remarks in response to Intel's recent comments that the foundry business will be in big trouble over the next few years as too much manufacturing capacity will cause company ASPs to fall.

TSMC previously announced its capex for 2011 will hike to US$7.8 billion, with the majority going to advanced technology capacity at its 12-inch fabs. The foundry also revealed its total spending on R&D is set to increase significantly in 2011.

According to a recent IC Insights research report, TSMC increased its R&D budget a hefty 44% in 2010 resulting in its rank among the top R&D spenders jumping from 19th to 10th in just one year. TSMC was the first pure-play foundry to join the global top-10 R&D spenders.

In addition, TSMC has confirmed its schedule for 18-inch wafer tape outs. The foundry expects to begin trial production on 18-inch wafers between 2013 and 2014 followed by volume production in 2015-2016.