Is TSMC becoming a "nightmare" for European IDMs?

Latest update time：2023-02-03

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Source: Content from Business Week , thank you.

We know that traditional automotive ICs are mainly provided by local IDMs. The United States is represented by TI and Microchip, Japan has Renesas, and Europe is represented by NXP, STM, and Infineon... The IDM model is from design, wafer manufacturing to packaging and testing, from top to bottom. Under the all-inclusive business model. The above-mentioned companies all gave up the advancement of manufacturing processes at about the same time, and also faded out of consumer electronics products at about the same time, focusing on special markets such as automotive and military industries.

After TSMC made money, while it was desperately investing in research and development and promoting Moore's Law, most of these IDMs were busy making acquisitions and consolidating their territory. Due to the lack of advanced processes, these companies can only outsource the few chips that require advanced processes (of course, mainly to TSMC). Even for mature process products, when they encounter insufficient technology or production capacity, they also begin to entrust external professional wafer foundries. Production. This is the so-called Fablite business model.

At the beginning of 2020, the global epidemic began to spread, and initial demand froze. Automakers began to cut orders from suppliers, and some automakers even cut their semiconductor orders to zero. Unexpectedly, the demand in the auto market picked up quickly, but when they rushed back to rush for automotive chips, the automakers suddenly discovered that due to the epidemic-driven trend of working and studying from home, the demand for consumer electronics exploded, and the semiconductor market was already severely out of stock, and the automakers simply could not place orders. Team. A car can be built as a complete vehicle, but even if it only lacks a few key chips priced at a few dollars, the car will not leave the factory at all.

This is a situation that is completely unimaginable and unprepared for large car manufacturers who usually complain that water will freeze!

After this battle, automobile manufacturers all over the world have learned a lesson. Originally, everyone took Toyota's zero inventory strategy as their teacher. After being taught a lesson, automobile manufacturers now know that automotive chips must not have zero inventory, otherwise there will be terrible disaster consequences.

Microcontroller MCU (Micro Controller Unit), also known as single-chip microcomputer, integrates different functions such as CPU, memory, power management chip, etc., and has both computing and memory functions. It has a wide range of applications. Mostly in consumer electronics, automotive electronics is also a very important market for MCUs.

Firstly, it is because of the complexity of the system, and secondly, it may be due to safety considerations. Automotive semiconductor architecture usually does not have an IC that plays the role of the brain that controls the entire vehicle. Automotive electronics have different subsystems for different functions. These subsystems all require a center for command and operation, that is, MCU. In the industry, automotive electronics are more commonly called ECU (Electronic Control Unit).

Due to safety considerations, automotive semiconductor technology advancement is relatively conservative and slow compared to consumer electronics. Therefore, at present, European automotive semiconductor factories mainly use mature processes of 40/55 nanometers. With the outbreak of the epidemic, global semiconductor production capacity has been tight since the second half of 2020, and automotive ICs have been severely out of stock. As a result, governments such as the United States, Japan, Germany, and the European Union have come to Taiwan to ask for production capacity quotas. What is most lacking in automotive is their original 40/55 nanometer Process MCU.

Cars cannot be shipped due to lack of chips. It only sells a few fewer chips to Taiwan, which is insignificant, but the impact on a major automobile production country is very important. This is a major event that will shake the country. It affects not only the car factories, but also the huge supply chain of satellite factories in the surrounding automobile industry. This is a catastrophe that will directly impact the country's GDP and unemployment rate.

Before the epidemic, automotive was actually a very regional and exclusive market. More than 80% of global automotive MCU production is concentrated in six major manufacturers, including NXP, Renesas, STMicroelectronics, Infineon, Microchip and Texas Instruments. TSMC and UMC make relatively few automotive semiconductors, and they are not yet the main suppliers in the world.

After an epidemic, the world discovered that only large-capacity professional wafer foundries like TSMC and UMC could quickly pull in goods. Therefore, the two companies took advantage of the situation to train in the automotive market and gradually joined the ranks of the main automotive suppliers. This unexpected Development is actually driven by car manufacturers and governments.

Now TSMC is building a factory in Germany, using a mature 28/22nm process, which is probably the most advanced process in Europe (although I am not 100% sure about this). In any case, it is absolutely certain that TSMC’s automotive products, regardless of product mix, specifications, and yield, will easily surpass the existing IDMs in Europe.

With the evolution of automotive electronics, more advanced processes will definitely be used in the future, but now 28nm is regarded as the sweet spot for mainstream automotive use in the foreseeable future, and it will be roughly sufficient for European car manufacturers in the next few years. Quoting TSMC President Wei Zhejia's recent statement: "Eighty percent of automotive chips are general chips, suitable for processes above 28 nanometers; the remaining 20 percent are advanced chips such as ADAS (autonomous driving systems), which may require processes below 14 nanometers."

Of course, IDM is still very important to car manufacturers, because TSMC does not do design. European IDM is TSMC's direct customer, and car manufacturers are indirect customers. TSMC's automotive chips are shipped to European IDMs to help design them, and then to European car manufacturers. Therefore, these IDM design departments are TSMC's customers, but their wafer manufacturing will definitely bear the impact of TSMC's advancement in the future. In the future, it is a trend for TSMC to have a higher market share in European automotive applications. It has already moved towards the Fablite light wafer factory model of IDM. What will happen if the market share continues to be small?

TSMC has a cooperative and competitive relationship with local IDMs. TSMC's decision to set up factories in various countries is not only facilitated by the political intervention of governments of various countries, but also mainly due to the urgent needs of local manufacturers. TSMC's establishment of factories in Europe is actually to respond to the common needs of local direct customers IDM and indirect customers car manufacturers. This part is symbiotic.

Simulate the possible impact on the European automotive market in the future after TSMC sets up a factory in Germany:

28nm can easily overwhelm existing IDM products, with better yields, higher efficiency, lower power consumption, lower costs for the same specifications, and even product specifications will be rapidly advanced.

Nowadays, multiple independent MCUs may be gradually integrated in the future, reducing the number of MCUs, but each one will become more powerful, pushing automotive electronics into the next generation. This is good news for car manufacturers, but it is definitely a nightmare for existing IDMs.

It can be foreseen that the biggest struggle for these IDMs in the future (in fact, it has already begun) is whether to invest more in building factories and pursuing TSMC's manufacturing processes?

If you continue to build a factory, you won't be able to compete, and your investment will become a burden that cannot be shed. If you don't build a factory and let TSMC go it alone, TSMC will definitely become a one-man martial arts world in the future...

TSMC is setting up a factory in Europe. How can it abolish the martial arts of local fabs? The plot is so unpretentious.

*Disclaimer: This article is original by the author. The content of the article is the personal opinion of the author. The reprinting by Semiconductor Industry Watch is only to convey a different point of view. It does not mean that Semiconductor Industry Watch agrees or supports the view. If you have any objections, please contact Semiconductor Industry Watch.

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