TSMC on Tuesday approved a $1.2 billion capital spending plan to expand the company’s 300-mm fab to 65nm in the Tainan Science Park in southern Taiwan, according to the company.

Part of the capital allocation is to expand the production capacity at the company’s 6- and 8-inch fabs.

The spending is part of TSMC’s overall capital expenditures this year. For 2006, the silicon foundry giant’s capital expenditures are expected to be in the range of $2.6-to-$2.8 billion.

The company has begun putting customers on allocation as it is unable to meet demand for certain manufacturing processes. However, a company executive said TSMC would be able to manage the situation.