TSMC's Behind-the-Scenes Hero
Latest update time：2022-01-08
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In 2022, TSMC will continue to expand the 3nm production line of Fab 18 in Tainan, while accelerating the production capacity of the 12-inch plant in Arizona, the United States, the 5nm plant in Nanjing, China, and the 28nm plant in Nanjing. Three new investments, including the 12-inch plant in Kumamoto, Japan, the 12-inch plant in Kaohsiung, and the 2nm production line of Fab 20 in Hsinchu Science Park, will also start construction at the same time. Due to the substantial increase in infrastructure and factory engineering costs, equipment manufacturers pointed out that TSMC's capital expenditure in 2022 will reach US$38 billion to US$42 billion.
TSMC originally planned a three-year, $100 billion expansion plan, but the COVID-19 pandemic has accelerated digital transformation. Equipment manufacturers revealed that after revising up capital expenditures for 2022, TSMC's three-year total investment forecast will also be revised up to $112 billion.
Such investment and expansion requires more industry chain partners, especially the support of the upstream supply chain. For TSMC, its advanced process is unique in the world, and has higher requirements for related equipment, materials, components, talents, etc. These are not only the beneficiaries of TSMC's high investment in expansion, but also the heroes behind the company's realization of its capacity planning. The two sides rely on each other and complement each other.
EUV support becomes increasingly important
TSMC's advanced processes are increasingly dependent on EUV lithography machines, making the industry position of ASML, the only manufacturer of such equipment, more prominent.
The Dutch semiconductor equipment maker's shares have surged nearly 70% in the past 12 months. ASML's market dominance has enabled it to generate steady revenue growth through expanding gross margins. It also plans to maintain its dominance with new high numerical aperture (NA) EUV equipment.
ASML's annual revenue grew at a compound annual growth rate (CAGR) of 12% between 2010 and 2020. If it grows at the same CAGR from 2020 to 2030, its annual revenue would increase from €14 billion ($15.9 billion) in 2020 to nearly €44 billion ($49.8 billion) in 2030.
ASML sold 258 lithography machines in 2020, including 31 EUV equipment. Sales of its EUV equipment are expected to rise as chipmakers produce more 7nm, 5nm and 3nm chips. By 2023, it may launch some high-NA systems that will enable foundries to manufacture chips at the 2nm process node.
EUV and high-NA EUV equipment will likely account for an increasing share of ASML's total shipments from 2025 to 2030. These equipment are more expensive than ASML's lower-end systems and can achieve higher gross margins. ASML expects this trend to increase its annual gross margin from 48.6% in 2020 to 54% to 56% in 2025. This expansion should continue through 2030.
On January 3, a fire broke out at ASML's factory in Berlin, Germany. It is reported that about 200 square meters of the 32,000 square meters of Berlin factory were affected by the fire.
ASML pointed out that they may need a few days to assess the impact of this incident on operations, and will report to the market as soon as the results come out. The factory where the fire broke out at ASML is mainly responsible for the production of components for lithography machines, including wafer tables, reticle chucks, and mirror blocks. Among them, the mask suction cups used to fix the mask are in short supply. At present, the factory's components are mostly supplied to EUV equipment, and the majority of them are for wafer foundry demand. If the delivery of components is delayed due to the fire, it is not ruled out that ASML will give priority to allocating major output to support wafer foundry orders.
EUV is mainly used for advanced processes below 7nm. Currently, only TSMC and Samsung use this type of equipment in the world, including TSMC's 7nm, 5nm, and 3nm process technology, Samsung's EUV Line (7nm, 5nm, and 4nm) and 3nm GAA process technology built in Hwaseong, South Korea. However, due to factors such as the shortage of global wafer foundry capacity and the active expansion of various factories, the delivery time of semiconductor equipment is getting longer and longer.
The fire at ASML's Berlin factory in Germany may have a significant impact on the manufacturing of EUV lithography equipment for wafer foundries. According to TrendForce, ASML may also obtain the required components from other factories. In addition, the current delivery time of EUV equipment is quite long, so the actual impact on EUV supply remains to be seen.
Currently, at a time when the world is experiencing a chip shortage, the fire at ASML may slow down the shipment of its equipment, and in turn affect its customers' ability to expand production capacity.
Obviously, TSMC is the most affected, which also reflects the importance of ASML to TSMC from one aspect.
EUV Pod cannot be ignored
EUV is important, but in order to fulfill its function, EUV Pod (mask box) is indispensable.
JDT is the world's largest supplier of EUV Pods, with a global market share of 70%, and its customers include many major semiconductor manufacturers in Taiwan, China and the United States. TSMC and JDT have had a long-term cooperative relationship, and the former's large-scale expansion in advanced processes has also driven the latter's investment. As wafer foundry manufacturers increase the degree of EUV into their processes, the use of EUV mask boxes will increase.
In April 2021, JDT held a groundbreaking ceremony for the Jiaqi Building under the group in Tucheng Industrial Park, New Taipei City, with an investment of NT$5 billion. The Jiaqi Building will not only serve as a production base for EUV mask boxes, but also expand the development of semiconductor consumables and aerospace products.
Last week, JAT said that it would not only build the Tainan Shugu plant and the Southern Science Park plant, but also expand to Taipei and New Taipei. The main reason for this is that TSMC's demand has increased significantly, and JAT needs to be prepared for off-site backup.
Because TSMC wants to expand production, it needs backup in both the north and south. It cannot be just in Tainan, because that is the most important production base for EUV mask boxes in the world. If something goes wrong, the global semiconductor supply chain will be disrupted, so backup is necessary in both the north and south.
3nm top talents
TSMC trial-produced the 3nm process at the end of 2021 and plans to mass-produce it in the second half of 2022. To ensure these implementations, in addition to equipment, relevant talents are crucial, especially technical leaders, who play a decisive role.
The 3nm technology R&D is led by Mi Yujie, senior vice president of R&D. Mi Yujie joined TSMC in 1994 and was a major R&D leader for TSMC's 7nm and 5nm processes. He also led the subsequent 3nm and 2nm processes. He is currently one of the two senior vice presidents of R&D at TSMC, the other being Luo Weiren. Mi Yujie's research results will determine TSMC's production performance, and his research results will be handed over to Luo Weiren's team, who will be responsible for developing mass production technology. The two are the locomotives of R&D.
In the R&D department, there are two very important vice presidents, Wu Xianyang and Cao Min, both of whom report to Mi Yujie. Wu Xianyang and Cao Min are often described as the two legs of TSMC in the development of TSMC technology, because they are responsible for the development of a technology generation of TSMC. Wu Xianyang is responsible for 28, 16, 7, and 3nm, while Cao Min is responsible for 40, 20, and 10nm.
Wu Xianyang is a key figure in the successful development of TSMC's 16nm and 7nm technologies. He has served as the senior director of the 3nm platform R&D department of the research and development organization and is a major R&D general for 3nm.
The key to TSMC's leading its competitors in advanced processes is packaging. Packaging technology is crucial to TSMC's 3nm success. TSMC's soul figures in the field of packaging are two vice presidents, Yu Zhenhua and Liao Deduo. Yu Zhenhua is an important promoter of TSMC's world-renowned copper process technology and a promoter of TSMC's back-end research and development; Liao Deduo worked at Chartered Semiconductor and Applied Materials before joining TSMC in 2002. He was the plant director of Fab 6 and the senior director of the back-end technology and service department. He is currently responsible for managing back-end technology and operations.
In addition, the three deputy general managers in charge of manufacturing, Wang Yinglang, Zhang Zongsheng and Liao Yonghao, are rising stars of the Mesozoic era that TSMC is actively cultivating.
Wang Yinglang is mainly responsible for the production and operation of processes below 28nm, including Fab 18 in Southern Taiwan Science Park and the Nanjing Fab in China; Zhang Zongsheng was formerly in charge of the advanced process trial production at Fab 12B in Hsinchu Science Park. In addition to continuing to promote the establishment of a 3nm trial production line, he also took over the technical committee and was responsible for all mask business; Liao Yonghao was responsible for all 8-inch factory business, and was also in charge of all 12-inch mature processes and WaferTech production in the United States.
Wang Yinglang was the director of Fab 14 in Southern Taiwan Science Park in 2015. At the age of 49, he was promoted to vice president of technology development as the youngest director, and was promoted from the youngest director to the youngest vice president. He has won the former chairman Morris Chang Award many times and was highly appreciated by Morris Chang. Whenever Morris Chang went to southern Taiwan, he would accompany him. Equipment suppliers named him as a key warrior for 3nm. After being promoted to vice president, Wang Yinglang was transferred back to Hsinchu Science Park to invest in the technical development of EUV equipment. In recent years, he has significantly improved wafer productivity and defect density, which is the key to TSMC's 7nm and 5nm technology defeating its competitors. He returned to Fab 18 in Southern Taiwan Science Park to fight for 3nm.
client
The ultimate goal of all the work of the above-mentioned behind-the-scenes heroes of TSMC is to help TSMC serve its customers. Only with the recognition and orders of customers can the work of all the behind-the-scenes heroes be truly valuable. From this point of view, customers are the ultimate heroes of TSMC.
In recent years, Apple has been TSMC's largest customer, and with a share of 25.93%, it is far ahead of all other TSMC customers; the second largest customer is MediaTek, whose order revenue accounts for 5.8%; in recent years, AMD has also increased its cooperation with TSMC, and the 7nm chip and next year's 5nm chip orders are all manufactured by TSMC. Earlier, there were reports that they are already TSMC's largest 7nm customer, but AMD's order share is only 4.39%, ranking third; next is Qualcomm, ranking fourth, with a share of 3.9%. This relatively low share has a lot to do with Qualcomm handing over the foundry of Snapdragon 8 series high-end chips to Samsung in recent years.
Following behind are Broadcom, NVIDIA, Sony, STM, ADI, and Intel. Although Intel's share is only 0.84%, it is also the tenth largest customer. If Intel's negotiations with TSMC go smoothly, it may use TSMC's 3nm process technology starting next year, and its share will increase.
Conclusion
TSMC has firmly grasped the advanced process foundry market through its own unremitting efforts and persistence, as well as the long-term cooperation and tacit understanding of upstream and downstream partners. This situation is likely to be difficult to break in the coming years.
*Disclaimer: This article is originally written by the author. The content of the article is the author's personal opinion. Semiconductor Industry Observer reprints it only to convey a different point of view. It does not mean that Semiconductor Industry Observer agrees or supports this point of view. If you have any objections, please contact Semiconductor Industry Observer.
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