Chip giant "inner volume" to build a factory, TSMC invested heavily in new processes, Samsung Intel is not willing to show weakness

Written | Kang Jialin, a weekly magazine of Finance and Economics

Editor| Chen Fang

Chip foundry manufacturers' plans to build factories are becoming more and more "involuted".

Recently, TSMC has decided to build a 100-hectare plant in Taichung's Zhongke Park, with a total investment of NT$800 billion to NT$1 trillion (about NT$28.9 billion to US$36.1 billion). This investment includes the future 2nm process factory, and the subsequent evolution of the 1nm process will also fall in the park.

TSMC's old rivals Samsung and Intel didn't sit still. Shortly after Samsung's head Lee Jae-yong visited the United States, Samsung officially announced that it would establish a chip production base in Texas, USA, costing $17 billion and putting it into production as soon as 2024; Intel had previously lagged behind in the process process slightly behind, and after experiencing high-level shocks, it announced that it would invest 30 billion ringgit (about $7.1 billion) in Malaysia, and would build a closed test production line in Malaysia in the next 10 years, intending to return to the card table.

Although from the perspective of market share, TSMC temporarily prevailed, but Samsung and Intel also began to increase investment, the tide of chip shortages brought about by the epidemic is regarded as a rare opportunity to overtake, and the current expansion is only a shot in the follow-up arms race.

Image source/official website

TSMC relies on the latest process and takes it step by step

Due to the great increase in demand from global customer groups, the capacity expansion and development of the three major chip foundries are undergoing five times faster than in previous years, in order to ensure the steady increase of high-end production capacity, capital expenditure has also been greatly increased, most of which is used for process process innovation.

The consensus of the industry is that the advanced process technology represents the status of the industry and technical capabilities, not only the star-making and the accumulation of electricity, but also the phased decline of Intel is also closely related to it.

For a long time, Intel's 14nm represented the best process for chip foundry. Moore's Law once said that the number of transistors that can fit on integrated circuits doubles every 18 months, but in the eyes of the chip giant, the doubling rate of transistors has been extended from 24 months to 36 months, and Moore's Law, which is regarded as the norm by the semiconductor industry, is "dead".

It was TSMC that shocked the industry enough. In April 2018, when Intel's 10nm process chip was difficult to produce, TSMC announced the successful mass production of EUV process 7nm process chips, and won the orders of HiSilicon Kirin 985 and Apple A13 in one fell swoop, and then came to the top.

Six months later, Samsung also announced mass production of the 7nm EUV process. The difference is that Samsung's non-fall is quite a bit of "catching ducks on the shelves" meaning. In 2019, the technology media DigiTimes exposed that the yield rate of Samsung's 7nm process chip was not high, and although Samsung quickly refuted it, it did not provide substantive evidence to prove its "innocence".

At that time, there were still people in the industry who continued to predict the failure of Moore's Law, and Henry Samueli, chief technology officer of Broadcom, said: "Moore's Law has grayed hair and faltered. It's not dead yet, but it's time to retire. Under the invisible sword of "Moore's Law is going to die", TSMC was not plagued by the yield problem, but accelerated the iteration speed of the process.

In 2019, TSMC began trial production of 5nm process chips, which will be installed on the iPhone 12 in 2020. At the same time, TSMC's upgrade cycle is still shortening, 4nm early trial production, but also announced that it will mass-produce 3nm process in the fourth quarter of this year, and now the 2nm factory is breaking the ground on the string, TSMC with an inner-roll action to declare that the process technology is leading, and TSMC is currently sitting first with a market share of more than 50%.

In addition, TSMC has not given up revenue on mature processes, the news said that it has reached an agreement with the Japanese government and Sony to build 28nm and 22nm process fabs in Japan, and recently there is news that Germany is also actively contacting TSMC and hopes to build a fab in Germany. "Behind the huge investment amount, there will be huge depreciation expenses, and the pressure on TSMC's revenue will not be small." An investor in the chip field told Caijing Weekly, "How to quickly improve yield and reduce the impact of depreciation on gross margin and profitability is also testing TSMC's management team." ”

Giants burn money for expansion

TSMC's iteration speed accelerated, and Samsung was in a hurry to catch up, and the latter also announced that the time for 3nm mass production was set for 2022.

Last month, Samsung Electronics had a "personnel earthquake" that replaced three co-CEOs in one go. It's the largest organizational realignment the South Korean giant has made since 2017. In addition, the mobile phone and consumer electronics divisions are merged into one, but the semiconductor business is still a separate division, and Samsung's intention to tilt toward the semiconductor industry has become obvious.

In fact, Samsung has always wanted to close the gap with TSMC's foundry level, and the gap is mainly due to the maturity of key process processes. After the official announcement of the establishment of factories in the United States, many people in the industry believe that they will receive support from the United States in terms of customer resources, production capacity, and taxes, thereby ensuring their influence. In addition, Samsung's foundry business has always had cost advantages, and the cost of the 3nm process is more expensive, and Samsung may have more room for operation in this regard.

When the competition between TSMC and Samsung is fierce, Intel's follow-up is relatively slow, after 7 years, Intel has been lying on the merit book of the 14nm process "sleeping", until 2019 to really mass production 10nm. In 2021, Intel completed the change of coach and accelerated the mass production speed of the 7nm process, and intends to crush the opponent in the number of transistors, the new CEO Pat Gelsinger also increased investment, and even proposed an ambitious plan: to break through the 5th generation CPU process in the four years before 2025.

The three major chip foundries are glued to build factories, guiding the iteration of the chip process, exchanging burning money for expansion, and the industry has entered the era of head competition, which means that it is difficult for new entrants to run a staking ground if they do not have more ammunition storage.

Of course, the three giants through the construction of factories on the one hand easier to maintain technology iteration, on the other hand can also increase production capacity, is expected to alleviate the current lack of cores, especially mature process chips can be used in cars, embedded memory, IoT equipment, which is also the most serious shortage of areas. Pat Gelsinger predicts that the global chip shortage will continue until 2023, and that expansion can cope with soaring demand for chips.

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