TSMC wants to invest 200 billion yuan to build a factory, and the chip giants have begun to burn money to expand the war

Author | Yuan Silai

Edit | Su Jianxun

The arms race among chipmakers is intensifying.

On December 28, TSMC decided to build a 100-hectare factory in Taichung's Zhongke Park, with a total investment of NT$800-1 trillion (about 184 billion to 230 billion yuan). This investment includes the future 2nm process factory, and the 1nm process plant will also fall in the Zhongke Park.

In addition to TSMC, chip manufacturers Intel and Samsung are also expanding fiercely. Samsung announced in November that it would invest $17 billion in Taylor, Texas, and in early December announced its biggest structural adjustment in recent years, tilting resources to the semiconductor business. After years of turmoil at the top of Intel, it has returned to the table and negotiated with Italy, which is expected to invest 8 billion euros to build a semiconductor packaging plant.

The semiconductor industry has been heating up in recent years, and the lack of core brought about by the epidemic has added another fire, and the smell of gunpowder between the three major factories has become more intense. TSMC is firmly in the first place with a market share of more than 50%, and it is also temporarily ahead of advanced processes. Both Samsung and Intel have undergone major adjustments this year, and will concentrate their firepower in the chip field next. When the pandemic brought a rare opportunity to overtake, this round of expansion is actually just the beginning.

Process roll

If it were not for the epidemic, the head players did not seem to expect that the demand for chips would be so strong.

Before the epidemic, the smartphone industry had stabilized, the Internet of Things and cars were slowly climbing, and their competitive focus was on process innovation.

For a long time, Intel 14nm represented the most advanced process, and in 2015, Intel announced that the doubling speed of transistors was extended from 24 months to 36 months, and Moore's Law seemed to have reached its limit.

In April 2018, TSMC shook the industry. When Intel's 10nm process chip was difficult to produce, TSMC was the first to successfully mass-produce a 7nm process chip with EUV process, and got orders for HiSilicon Kirin 985 and Apple A13.

The atmosphere of competition is abrupt and fierce. In October of the same year, Samsung also announced mass production of the 7nm EUV process. Samsung's actions at that time were actually hasty, in 2019, the technology media DigiTimes exposed the news that the yield rate of Samsung's 7nm process chips was not high, and even affected the supply of Qualcomm 5G products. Although Samsung quickly refuted it, it did not come up with specific yield information.

TSMC does not seem to have received too much yield trouble, but also accelerated the process update speed. After the mass production of 7nm, in 2019, TSMC began trial production of 5nm process chips, which will be used on the iPhone12 in 2020. In the first quarter of this year, 5nm mobile phones have just begun to occupy the market, and TSMC has begun to promote the research and development of 4nm and 3nm processes. In September this year, the A15 of the iPhone 13 used the second generation of TSMC's 5nm process, and next year's iPhone 14 is likely to use a 4nm chip.

On June 9, 2021, the 12-inch wafer produced by TSMC OEM was photographed at the World Semiconductor Congress

TSMC's upgrade cycle is still shortening, the 4nm process process that was originally trial production in the fourth quarter of this year was advanced by one quarter, and they also announced that they will mass-produce the 3nm process in the fourth quarter of 2022, and will start mass production of 2nm process chips in 2024.

TSMC is airtight in its forward speed, and Samsung is in a hurry to catch up, and the time for 3nm mass production of both companies is set for 2022.

When the competition between TSMC and Samsung is fierce, Intel is even slower. They stayed in the 14nm process for 7 years, and did not really mass-produce 10nm until 2019, which is equivalent to the number of transistors in TSMC's 7nm process.

In 2021, Intel replaced CEO Bob Swan, who also became the shortest-serving CEO in Intel's history. The new CEO is VMWare CEO Pat Gelsinger, who was also Intel's first CTO.

Since then, Intel has accelerated its speed and will mass-produce the 7nm process next year, and the number of transistors is even higher than that of TSMC's 5nm process products. Intel also proposed an ambitious plan: to break through 5 processes in 4 years.

The three giants are guiding the iteration of the chip process, and TSMC is currently in the ascendant, but Samsung and Intel have also begun to increase investment, and 2025 is obviously a key node.

Fight for 2025

Demand for chips in 5G, ioTs and smart cars is on the rise, but it wasn't until the pandemic began that structural shortages were revealed.

The lack of cores that began in 2020 continues to this day, and there is still no sign of relief, and the super cycle of semiconductors has begun.

According to TSMC's financial report, in 2020, TSMC's sales hit a new high of NT$1.339 trillion (about 309.78 billion yuan), an increase of a quarter over 2019. Samsung's recent third-quarter earnings report showed that their single-quarter sales exceeded 70 trillion won for the first time, setting a new record.

This means that TSMC and Samsung have more ammunition to race around.

They also take the opportunity to start the expansion path. TSMC said at this year's Q3 briefing that this year's capital expenditure will increase from the previous $25 billion to $28 billion to $30 billion, and in the next three years, they will invest $100 billion in production and manufacturing.

In addition to Taiwan, TSMC announced that it will spend 12 billion yuan to build a factory in Arizona, USA, mainly producing 5nm process chips. These production lines will begin mass production in 2024, producing 20,000 wafers per month. Wei Zhejia, CEO of TSMC, once explained the expansion plan: "We are ushering in the opportunity for structural growth of semiconductors, 5G brings huge opportunities, high-performance computing-related applications will drive a significant increase in computing power and a huge demand for energy-efficient computing, which requires advanced technology." ”

In addition to advanced processes, TSMC is also expanding its mature process production lines. In November this year, TSMC and Sony subsidiary Sony Semiconductor Solutions partnered to set up a foundry subsidiary in Kumamoto Prefecture, Japan, with an initial investment of up to $7 billion and Sony investing $500 million. The plant mainly produces 22nm and 28nm process chips and will start production by the end of 2024.

Outside of Japan, TSMC will invest $2.887 billion to expand its 28nm process capacity in Nanjing, increasing its monthly wafer production by 40,000 wafers. In Europe, TSMC is in contact with Germany to build factories.

Their expanded mature process chips are mainly used in automobiles, embedded memory, IoT devices, and are currently the most in short supply. According to Wei Zhejia, TSMC's production capacity tension will continue until 2022.

TSMC is using this time window to stabilize its position and open up a bigger gap with its opponents. After all, Samsung also intends to mass-produce 3nm chips in 2022-2023, and the time for tit-for-tat is approaching.

It can be expected that after this round of expansion, the chip industry will be more concentrated in several head manufacturers. In 2025, it may be difficult for new entrants to find gaps.