TSMC’s Chairman, Mark Liu, recently addressed the challenges posed by global fragmentation and emerging national security concerns, which may potentially lead to a slowdown in global innovation. Despite these concerns, Liu emphasized Taiwan’s ability to respond calmly. TSMC remains committed to advancing its manufacturing processes and collaborates closely with clients to establish an open innovation platform.

On November 22th, Liu spoke at a lecture organized by Chinese National Association of Industry and Commerce, Taiwan (CNAIC), focusing on “TSMC in the AI Era,” as reported by the Central News Agency (CNA). During the lecture, Liu highlighted that Taiwan’s semiconductor industry, serving as a cornerstone, plays a vital role in driving advancements in AI applications.

However, he also acknowledged that the ongoing US-China chip war has brought global fragmentation and raised national security concerns, potentially slow down the pace of global innovation. Despite these challenges, Liu expressed confidence in Taiwan’s ability to handle them effectively.

In terms of  latest updates on TSMC’s global fabs, Liu mentioned positive communication with local unions in the US, showcasing TSMC’s ability to adapt and learn from new experiences. He also commended the high-quality and dedicated personality of Japanese engineers during his visit to Japan.

TSMC’s fab in Arizona, employing nearly 1,100 local staff, continues to recruit talents with plans for mass production to commence in 2025. The Kumamoto fab in Japan is expected to initiate production of 12nm, 16nm, 22nm, and 28nm processes by the end of the next year.

Regarding TSMC’s upcoming fab in Germany, the company aims to establish a specialized wafer fab focusing on automotive and industrial applications. This fab will produce 12nm, 16nm, 22nm, and 28nm processes, with construction set to begin in the second half of the next year and production slated for the end of 2027.

[News] TSMC’s Fab in Germany Progress Reports Potential Setback in Manager Selection?

Rise of Nvidia and other fabless companies, anticipating 10% growth in the next five years

Looking forward to the future tech landscape, Liu also anticipated Nvidia’s emergence as the world’s largest semiconductor company in 2023. From recent financial reports, Nvidia’s Q3 revenue reached USD 18.12 billion, surpassing TSMC’s USD 17.27 billion for the same quarter, as well as Intel’s USD 14.16 billion and Samsung Semiconductor’s USD 12.52 billion.

The rapid progress of Fabless companies also caught Liu’s eye. Fabless companies are expected to grow by around 10%, and IDMs by only 4% in the next five years. Additionally, he emphasized that semiconductor technology advances threefold every two years, projecting a 242-fold improvement over a decade.

What is “Fabless”?

Companies exclusively engaged in semiconductor design are referred to as “Fabless.” This term originates from the fact that these companies do not have their own fabrication. They are also known as “fabless semiconductor companies” due to their specialty of not owning production fab. Further categorization within fabless companies includes IC design and IP design.

Industry note that Nvidia’s growth as a fabless company is attributed to the surging demand for AI, including an optimized product portfolio. While Nvidia’s financial report mentioned geopolitical limitations and potential delays in H20’s launch, the company remains a global leader in AI computing. As for TSMC, it stands out as the most advanced pure-play foundry with its 3nm process, gradually increasing production in the second half of the year to alleviate inventory adjustment pressures within the rest of the 7nm family.
(Image: TSMC)

According to TechNews’ report, Gitae Jeong, Vice President of Samsung Electronics, recently revealed in an interview that the company is set to introduce the SF1.4 (1.4nm) process, expected to enter mass production in 2027.

This announcement intensifies the competition in advanced semiconductor manufacturing, particularly in the development of 2.5D/3D integrated heterogeneous structure packaging among the three major semiconductor foundry giants.

• TSMC: N3P Process Superior to Intel 18A, N2 to Lead Industry’s Advanced Processes

Previously, the semiconductor industry reported challenges with both TSMC and Samsung achieving yields above 60% for their 3nm processes due to undisclosed issues. TSMC’s yield was reported to be only 55%, below the normal yield rate.

However, TSMC’s President, C.C. Wei, expressed optimism, stating that current N3 demand is better than three months ago, contributing to a healthy growth outlook for TSMC in 2024.

Wei also anticipates that TSMC’s 3nm process will contribute a mid-single-digit percentage (4%-6%) to the company’s annual wafer revenue in 2023.

Regarding competition with rival Intel’s 18A process, Wei believes that TSMC’s N3P process offers better performance, power, and area (PPA), alongside improved cost efficiency and technical maturity. Furthermore, TSMC’s upcoming N2 process is expected to be the industry’s most advanced when introduced.

• Intel: Striving for the Fourth Customer for 18A Process Outsourcing Orders

Intel’s CEO, Pat Gelsinger, has revealed that the 18A process has secured orders from three customers and aims to acquire a fourth customer by the end of the year. The advanced 18A process is scheduled to begin production at the end of 2024, with one customer already having made an advance payment. External expectations suggest that the customer could possibly be NVIDIA or Qualcomm.

Intel has stated that Intel 4 and Intel 3 processes are similar, as are Intel 20A and Intel 18A processes. Consequently, Intel’s primary focus will be on offering Intel 3 and Intel 18A to semiconductor foundry customers. Meanwhile, Intel 4 and Intel 20A processes are more likely to be used internally. However, Intel is open to accommodating customer requests if they express interest in adopting these later processes.

• Samsung: Commencing Mass Production of SF2 in 2025, Prioritizing Internal Use

Due to challenges with the three-nanometer (3nm) manufacturing process, there have been reports that Samsung plans to shift directly to the more advanced two-nanometer (2nm) process.

According to Samsung’s Foundry Forum (SFF) plan, they will begin mass production of the 2nm process (SF2) in 2025 for mobile applications, expand to high-performance computing (HPC) applications in 2026, and further extend to the automotive sector and the expected 1.4nm process by 2027.

Similar to Intel, Samsung intends to prioritize the production of its own products using the 2nm process. The 2nm process products will initially be utilized for Samsung’s in-house products rather than external customer products.

• Summary

While TSMC’s N3 series currently enjoys broad support, including N3E, N3X, and N3P process series, the move to 2nm introduces new variables as it adopts a completely new GAAFET architecture. Regardless, whether it’s TSMC’s N2, Intel’s 18A, or Samsung’s SF2, each of them possesses its competitive strengths. The industry is also eagerly anticipating the future developments in advanced semiconductor processes.

Read more

• [News] Progress and Adoption of Advanced Processes by Samsung, Intel, and TSMC

In recent developments, Samsung Foundry, a subsidiary of Samsung Electronics, has disclosed that it has initiated discussions with major chip clients, gearing up to provide services utilizing 1.4nm and 2nm processes.

It’s been said that Samsung being ahead in the production of 3nm GAA (gate-all-around) process, yet not as favored by major clients as TSMC. In response to the comment, Ki-tae Jeong, the CTO of Samsung Foundry, had share his insights at Semiconductor Expo 2023 in South Korea.

According to the Chosun Ilboon’s report, Jeong pointed out that in the semiconductor foundry industry, it typically takes approximately 3 years for major clients to make their final purchasing decisions. Samsung is actively engaging with prominent clients, and results may become evident in the coming years. Also, the company is currently discussing future processes such as 2nm and 1.4nm with major clients.

How are advanced semiconductor processes progressing?

Compared to mature processes, advanced processes are better suited for applications that demand high performance and low power consumption. With emerging technologies like AI and high-performance computing driving the industry, the demand for advanced processes continues to rise. Leading semiconductor companies are committed to developing new technologies, with chip advanced processes evolving from 5nm to 4nm and now down to 3nm, while looking ahead to the possibility of reaching 2nm and 1.4nm.

Current progress from major players:

Samsung
Samsung has already commenced mass production of its second-generation 3nm chips and aims to introduce the 2nm process by the end of 2025, with the 1.4nm process expected by the end of 2027.

TSMC
TSMC is planning to start production for N3P in the latter half of 2024, with N3X and the 2nm process set to enter mass production in 2025. TSMC will introduce Gate-all-around FETs (GAAFET) transistors for the first time at the 2nm process node, offering a 15% speed increase at the same power consumption and up to a 30% reduction in power consumption at the same speed, all while increasing chip density by more than 15%.

Intel
Intel is diligently pursuing its “Four Years, Five Nodes” plan. Presently, Intel 7 and Intel 4 are in mass production, and the Intel 3 process is expected to enter the readiness for production stage in the latter half of this year. Subsequently, Intel 20A and 18A processes are planned to enter the readiness for production stage in the first and second halves of 2024, respectively.

Moreover, industry experts believe that in the near term, Intel will focus on the Intel 3 process as its flagship offering in the advanced process semiconductor foundry sector to compete with TSMC, Samsung, and other players.

According to TrendForce’s latest investigation, Chinese foundries have already suspended plans to expand production capacity for advanced processes after the US government began restricting the exportation of equipment and technical support for processes related to non-planar architectures. TrendForce believes that a further tightening of the restrictions on lithography equipment will mainly affect mature processes, especially the 28nm. Chinese foundries might proceed more slowly in adding new production capacity or raising output for the 28nm process due to the prolonged reviews on their equipment purchases.

TrendForce semiconductor analyst, Joanne Chiao, said that Chinese semiconductor companies have already suspended the development of chips featuring the GAA architecture (i.e., nodes that are generally ≤3nm) after the US government began restricting the exportation of EDA tools and related technical support. If we talk about the FinFET architecture that Chinese foundries are able to produce for now, it is possible to achieve the faster computing speed of the more advanced chips by combining multiple lower-end chips. However, it might also be very challenging to raise the production yield rate of a solution that integrates multiple chips, not to mention that the power consumption of such solution might be very high as well.

Seeing the US export control, for now, US government has not imposed restrictions on the exportation of technical support for processes related to planar architectures. On the other hand, Chinese foundries might halt their advanced chip (14nm) production at any time if they encounter an equipment malfunction or another problem that requires technical support from US equipment providers.

At last, Chiao emphasized that the US sanction has definitely accelerated the development of an “all-China” semiconductor manufacturing supply chain. Nevertheless, the world’s top eight semiconductor equipment providers all come from Japan or the US. From the perspective of the foundry industry, it will be hard for China to realize a wholly or mostly native semiconductor supply chain within the foreseeable future.

The market started worrying about the oversupply in semiconductor 2023, when the demand will start growing again depends on two factors: the situation of the macroeconomy and the inventory status.

Since foundries’ capacity utilization rates started drop in 3Q22, chip supply as a whole has decreased significantly. This, in turn, has helped limit inventory growth across the supply chain. However, the global economy is still at risk of a mild recession, so consumers may allocate more of their spending to daily necessities. They may also spend more on tourism due to easing of the pandemic. This could lead to weak sales for consumer electronic products.

Not to mention that most consumers already purchased the electronic products that they need for working or studying at home during the pandemic. Assuming that the overall inventory level of the supply chain will return to a healthier level, TrendForce believes that chip demand will begin to rebound to a certain extent in 2Q23. Then, the demand growth will become more obvious from 3Q23 onward. Nevertheless, this demand growth may not be too strong due to uncertainties in the global economy.

If we observe the situation from the perspective of the foundry industry, smartphones represent the largest application segment in terms of wafer consumption. The smartphone supply chain started inventory correction earlier, so demand rebound might be more obvious initially for smartphone-related chips compared with chips used in other consumer devices. On the other hand, with different benchmarks, the demand for HPC chips will show more significant growth compared with the demand for smartphone chips.