In a period of chip shortages and fierce competition for new technologies, TSMC has always occupied a dominant position in chip production. The Financial Times recently wrote an article analyzing the reasons why TSMC has become the core of the global semiconductor industry.
The southern part of Taiwan, China was once a dilapidated rural town. With the arrival of the world's most advanced chip factory-TSMC, a construction frenzy has been set off.
It is reported that TSMC is building a 3nm chip factory in Tainan. Li Ta-sen, who runs a local real estate brokerage company, said: “The price of land adjacent to the factory tripled last year, and our turnover reached the highest level in nearly 10 years.” He also witnessed TSMC’s engineers snapping up new apartments and The housing situation.
However, the impact of TSMC’s new plant is far beyond Tainan, and it plays a pivotal role in the entire semiconductor market. The factory covers an area of 160,000 square meters, equivalent to the size of 22 football fields, and is expected to start mass production of 3nm chips next year.
Although TSMC is a low-key company, its huge investment in cutting-edge technology and growing influence are quietly attracting people's attention.
In the context of global chip shortages that have forced Japan, Europe, and the United States to slow down or even suspend automobile production, and many countries call for more production to be transferred to the local area, TSMC’s dominant position in global chip production is attracting widespread attention. .
The Financial Times pointed out that the United States is far less capable of chip manufacturing than TSMC, and Intel is preparing to outsource part of the processor's production to TSMC. In addition, the U.S. Department of Defense has also been putting pressure on the U.S. to increase investment in advanced chip manufacturing so that its weapons production does not depend on foreign manufacturers.
Although many governments hope to imitate the success of TSMC, they may find that the cost of trying to match TSMC is prohibitive. TSMC’s customers have also begun to realize that they are not dealing with traditional suppliers.
Ambrose Conroy, founder and CEO of Seraph, a supply chain consulting company, said: "Automakers firmly believe that they are the world's giants. But in this case, the semiconductor manufacturers are ‘giants’ and the car procurement team is ‘ants’.”
TSMC has long been "behind the scenes" because the semiconductor products it manufactures are designed and sold by brands such as Apple, AMD or Qualcomm. However, TSMC controls more than half of the world's foundry market.
It is worth mentioning that at each new process node, TSMC is becoming more and more dominant: although it only accounts for 40% to 65% of revenue from 28-65nm (the node used to produce most automotive chips), But in the most advanced nodes currently produced, it occupies almost 90% of the market share.
Peter Hanbury, a partner of Bain & Company in San Francisco, affirmed the above statement and said: “The semiconductor industry’s dependence on TSMC is incredible. Twenty years ago there were 20 foundries, and now the most cutting-edge technologies are located in Taiwan. In a park."
Because each new process node requires more challenging development and greater investment in new capacity, other chip manufacturers have begun to focus on design over the years, and have left production to specialized foundries such as TSMC. The higher the cost of the new manufacturing unit, the more other chip manufacturers begin to outsource, and the fewer competitors TSMC will have in the pure foundry market.
This year, TSMC has raised its capital investment forecast to US$25 billion to US$28 billion, which may be 63% higher than in 2020 and far higher than Intel and Samsung. Analysts believe that this includes at least part of the investment in TSMC's supply of required production capacity to Intel. Intel was forced to outsource part of the processor production because it has been difficult to grasp the two continuous process technology nodes of 10nm and 7nm in time to manufacture its own chips.
Intel's continuous mistakes in the second-generation manufacturing technology have triggered calls from investors to ask the company to abandon chip manufacturing and switch to a "fabless" business model.
However, Intel’s new CEO Pat Gelsinger rejected this proposal and said in a video conference on Tuesday: “People’s confidence in 7nm is increasing. Intel is strengthening cooperation with TSMC and other foundries, and outsourcing some processor manufacturing to TSMC. ."
Although Pat Gelsinger promised to revive Intel’s manufacturing capabilities, the company still needs TSMC to transition for a period of time to prevent losing to rival AMD in the central processor market.
How to dominate?
TSMC has become increasingly dominant in the field of chip manufacturing and has begun to attract political attention. The impact of the shortage of automotive chips has increased the pressure on governments of all countries to require key supply chains to be located within their own borders to reduce the risk of rupture under uncertain factors such as the epidemic, and to ensure that the supply chain is not affected by geopolitical factors.
U.S. lawmakers called on the United States to revive the semiconductor manufacturing industry on the grounds of chip shortages. Last year, under the political pressure of the Trump administration, TSMC promised to build a US$12 billion wafer manufacturing plant in Arizona.
In addition to the United States, Japan and the European Union have also begun to make a difference. TSMC announced last month that it would set up a subsidiary in Japan to specialize in research on new semiconductor materials. A Japanese official warned: "TSMC is not safe only in Taiwan, China, and needs to be dispersed."
The EU hopes to bring cutting-edge chip production back to Europe through a plan that seeks to invest in the construction of a 2nm chip factory-this is the next generation of art and technology node after the 3nm factory built by TSMC in Tainan.
From a few data, it is enough to see the strength of TSMC. TSMC will increase its capital investment to this value this year from 25 billion to 28 billion US dollars, which will increase by 63% compared with 2020; 3nm, the transistor size is only 1/20000 of human hair, and the most advanced chip currently produced is 5nm; 90% , TSMC’s market share of the most advanced nodes currently produced.
Analysts pointed out that a key reason why TSMC is so efficient and profitable is that its manufacturing industry is concentrated in Taiwan. A TSMC spokesperson once said publicly: "TSMC's factories in Taiwan are very close. TSMC can flexibly mobilize engineers and support each other when necessary."
The company estimates that production costs in the United States are 8% to 10% higher than those in Taiwan. Therefore, TSMC is not ready to spread its manufacturing operations around the world. A TSMC executive said: "After the US authorities made it clear that the subsidy cost gap, we promised to build a fab. Investment in Japan is concentrated in technology areas that are critical to the company's future. However, this is not the case in Europe. Serious. European authorities should figure out what they really want and whether they can achieve this goal with their own chip manufacturers."
Another reason for TSMC’s dominance in the foundry market is that it continues to invest in cutting-edge technologies. TSMC’s competitors such as GF, Taiwan’s UMC and other companies have gradually given up their cooperation due to the huge amount of money spent. The ambition of cutting-edge capacity competition.