As a child, Li Ta-sen used to walk to school through the taller sugar cane fields. About 40 years later, he made a living by selling such plots of land when the real estate bubble burst in his hometown of Thien Hoa (Tainan). In this poor countryside, property prices have exploded. The reason is that the world’s most modern chip factory appeared.
“Adjacent farm land prices tripled last year,” said Li, managing director of a local branch of brokerage firm Century 21. by”. He has seen TSMC engineers build apartments and private houses in recent years.
The new fab factory’s influence, however, even exceeded that of southern Taiwan. In the semiconductor industry, TSMC is the “center of the universe”.
The new factory in Thien Hoa is expected to begin mass production next year and use the process technology that only TSMC and Samsung can do, which are 5nm chips. These new chips will bring a big advantage to customers: the smaller the transistor on the chip, the lower the power consumption and the higher the speed.
With an area of 160,000 square meters – equivalent to 22 football fields, this factory shows the true “strength” of TSMC: they are “green giants” in the global semiconductor industry. Although it is just an ordinary company, TSMC’s large investments in cutting-edge technology and growing influence are helping them become the “stars” in the industry.
Currently, the global shortage of chips is causing the car manufacturing industry from Japan to Europe to stagnate. In addition, country politicians are also discussing domestic chip production. In that context, the dominant position of the Taiwanese company is attracting much attention.
In addition to complex geopolitical issues, Taiwan is also caught up in a technological competition between the two superpowers China and the US. Mainland companies can’t compete with TSMC’s manufacturing capacity, but the US is also starting to struggle as Intel intends to partner with TSMC on some of the production stages for microprocessors. Meanwhile, the Pentagon has silently urged to invest more in the industry so that weapons don’t depend on outside manufacturers.
All of these factors make TSMC the most important company in the world, though few have heard of it.
“Automakers believe they are the ‘giants’ in the world,” said Ambrose Conroy, founder and CEO of Seraph, a supply chain consulting firm. in which the manufacturer of the semiconductor is the giant, while the car buyers are the ants “.
TSMC has long gone unnoticed, because of the semiconductors they are designed and sold on the products of big-name vendors like Apple, AMD and Qualcomm. However, the company accounts for more than half of the world market for ordered chips.
Currently, TSMC is dominating with every new technology (node). The transistor size in the 3nm node is only 1/20000 human hair. Although accounting for only 40-65% of sales in the 28-65nm segment, TSMC’s nodes are used to make most of the car chips, accounting for nearly 90% of the market and are the most modern nodes in use. used in production.
Since the new type of node requires more challenging development and has to invest more heavily in new production capacity, other chipmakers for many years have focused on design and production for ” specialized “workshop like TSMC”. The more the cost of a new manufacturing unit increases, the more chipmakers begin to outsource. Accordingly, more and more TSMC’s competitors gave up.
This year, TSMC has raised its capital investment forecast to $ 25-28 billion, possibly 63% higher than in 2020 and surpassed Intel and Samsung. Analysts believe the capital includes some investment in the capacity the Taiwanese manufacturer needs to use to supply Intel.
After a period of not catching up with new manufacturing technology, Intel’s new CEO, Pat Gelsinger, said Intel will restore production capacity. Even so, the US company still needs to work with TSMC during at least the transition period to avoid losing market share to its core manufacturing unit or rival AMD. According to sources familiar with the matter, TSMC and Intel had a working group for more than a year to prepare for CPU production.
The cost is so high that it is increasingly difficult for companies to stay firm in chip manufacturing. However, Intel’s example shows money isn’t the only factor. The miniaturization of transistors – the key feature to add more components to a chip, thereby allowing cost and energy savings, is becoming a major engineering challenge.
TSMC’s dominant position is attracting political attention. The shock from the lack of car chips is putting great pressure on the government to bring important supply chains “closer to home”. The aim was to avoid disruptions during times like the Covid-19 translation and to avoid the influence of adversaries like China.
The US government has said it needs to boost domestic production of semiconductors. TSMC will build a $ 12 billion plant in Arizona. In addition, TSMC will establish a subsidiary in Japan when the country “dominates” the supply of upstream materials for the semiconductor industry. Even EU countries are now ambitious to return to advanced chip production, looking for investors in 2nm chip factories – next generation 3nm chips.
Under these pressures, TSMC’s business model will face difficulties. According to analysts, the main reason why this company is efficient and profitable is that it concentrates on production in Taiwan. According to Nina Kao – TSMC spokesperson: “TSMC’s main locations in Taiwan give us the flexibility to mobilize engineer support when needed”.
The company estimates that production costs in the US are 8-10% higher than in Taiwan. As a result, TSMC is not ready to decouple production globally.
Although controversies and concerns about the dominance of TSMC have just “emerged” at the present time, but their position has caused concern for customers for a long time.
Peter Hanbury, a partner at Bain & Co., said: “For several years, famous companies feared that TSMC’s dominant position would give them power when it comes to pricing.” That concern, he added, was strained when GlobalFoundries – TSMC’s only US competitor, “gave up” in 2018.
Semiconductor Manufacturing International Corporation (SMIC) – China’s largest chip maker, is committed to moving forward. Last year, though, the company ran into U.S. sanctions that gave it no access to the equipment needed to build modern chip facilities. The other opponent is Intel. Despite difficulties in modern manufacturing technology, the company said it will invest $ 20 billion to build two new plants in Arizona.
However, TSMC will not give in easily. With plans to invest heavily in capital this year, the company has shown that it is determined to maintain its lead. It is known that a significant part of this capital will be poured into ultraviolet photolithography (EUV) – an indispensable device in modern manufacturing areas.
ASML – Dutch company leading the EUV market, recently said that their capacity is not keeping up with demand. As a result, industry experts believe that all of TSMC’s current orders still help them create a great distance from any potential competitor.
According to: Financial Times