It may be lonely at the top, but Taiwan Semiconductor Manufacturing Company (TSMC) intends to stay there.

To do so, the world’s largest contract chipmaker is accelerating work on its 2nm (nanometer) process node, while keeping an eye on competition from Intel and Samsung. TSMC is wary it will miss out on the chance to produce the chips needed for ever-expanding data centers and the next generation of thin-and-light smartphones if it does not innovate to stay ahead of its U.S. and South Korean rivals.

“TSMC uses leading-edge nodes to address smartphones and high-performance computing (HPC) markets, primarily. We should expect smartphone and data center customers to be adopting 2nm when it is available,” said Strategy Analytics semiconductor analyst Sravan Kundojjala. “A strong roadmap is important for TSMC to maintain its foundry leadership and competitiveness. The company will see increased competition from Intel and Samsung foundries in the future. So, this is a significant development for the company and the industry.”

Intel has thrown down the gauntlet to TSMC, aiming to recover its lost chipmaking crown by 2025. Intel’s new CEO Pat Gelsinger spelled out the company’s ambitions during the Intel Accelerated webcast. “Building on Intel’s unquestioned leadership in advanced packaging, we are accelerating our innovation roadmap to ensure we are on a clear path to process performance leadership by 2025,” he said.

That could be easier said than done. TSMC plans to launch 3nm chips at the end of 2022, while Intel will roll out 7nm process technology at roughly the same time. Now that TSMC expects to have 2nm chips ready by 2023, Intel’s chances of catching up soon look remote.

Samsung’s chances are not much better. The South Korean firm is strong in dynamic random access memory (DRAM), but it invests far less than TSMC in contract manufacturing. TSMC has an edge in advanced semiconductors like the central process units (CPUs) that act as the computing brains of smartphones.

With TSMC busy building fabs abroad, including recently announced facilities in Japan and its Arizona foundry under construction, some observers believe its most advanced process node will also migrate to get closer to key customers in the U.S.

That will not happen anytime soon, according to Joanne Chiao, a Taipei-based semiconductor analyst with the market intelligence firm TrendForce.

“There is no such plan for now; the most advanced process node built outside Taiwan will be in the ongoing Arizona fab, which will utilize 5nm initially in 2024,” she told Taiwan News.

She said that TSMC’s foundry in Japan will initially utilize the 28nm node, and migrate towards more advanced nodes in the future.

Kundojjala said the chips will likely be for Sony applications involving camera image sensors, but could also be used by Japan’s automotive customers.

In its earnings call, TSMC indicated advanced node production will stay in Taiwan due to joint engineering research projects that help accelerate advanced node introduction, Kundojjala added.

However, for the fabs that do move, parts of the supply chain will go with it.

TrendForce expects TSMC to partially shift certain high-gross margin wafer start orders placed by U.S. companies to its U.S.-based fabs, Chao said. “Nevertheless, in spite of TSMC’s existing 8-inch wafer fab in the U.S., the company has to handle the fact that 12-inch fabs require different supply chains compared to 8-inch fabs.”

That is why TSMC’s project in Arizona may also involve other Taiwanese suppliers of semiconductor-related raw materials or even components moving their production to the U.S. as well, she added.

In an earlier era, the whole supply chain would need to be clustered around the fab, but that is no longer the case, Kundojjala explained, highlighting recent comments by TSMC that its wafer operations (where the chips are made) and packaging facilities (where they are readied to be attached to their host) need not be in the same area.

Meanwhile, investors remain sanguine about TSMC, in spite of the logistical challenges it faces making chips in new overseas locations and the persistent efforts of Intel and Samsung to muscle in on its territory. As of Aug. 3, TSMC’s share price has risen 10.82% over the past year to reach NT$594 (US$21).

By: DocMemory
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