The electronic chip shortage crisis has disrupted supply chain security and industrial activities worldwide.
Amid a global semiconductor race, Taiwan Semiconductor Manufacturing Company (TSMC), the world’s top chipmaker, has become the company that is most invited to set up factories in many advanced economies.
Since 2020, the semiconductor shortage has led to the reduced production of automobiles, smartphones, computers, and appliances, pushing chipmakers worldwide to rapidly expand their production capacity.
World’s No. 1 Chip Foundry
For the entire 2021, TSMC posted $56.8 billion in revenue, up 25 percent from $45.5 billion in 2020, according to its earnings report.In the foundry market, TSMC recorded the highest global market share of 59.5 percent in 2021. In second place, Samsung occupied 8.7 percent, while, in fifth place, China’s SMIC, only occupied a 5.7 percent market share, according to DIGITIMES Asia.
TSMC’s immense market share is due to its advanced process technologies, which generate most of its revenue.
In semiconductor fabrication, generally, the smaller the process technology, the more advanced the chip. The smaller the technology node, the higher the transistor density and the lower the chip power consumption, resulting in higher performance. However, the smaller manufacturing process requires more advanced material and production technology and a greater cost in R&D and production lines.
Currently, only TSMC, Samsung, and Intel possess the most advanced manufacturing processes. Among them, TSMC has the highest production volume and yield rate in advanced chips. Yield is a quantitative measure of the quality of a semiconductor process; it reflects the amount of product that can be sold relative to the amount manufactured.
On Feb. 9, the European Commission unveiled the “European Chips Act,” which aims to enable the European Union (EU) to work more closely with world leaders in the semiconductor industry, such as Taiwan. The Act neutralizes its strict rules governing state aid, to lure companies like Intel and TSMC to build more microprocessors in the region.
Liu added that TSMC’s global market share of advanced nodes below 10 nm is around 63 percent, the world’s largest. And its production capacity in mature nodes is also the largest globally, accounting for about 20 percent, and making it the most desirable company to invite to Europe.
The United States
The U.S. House of Representatives on Feb. 4 passed the “America COMPETES Act,” which includes a $52 billion allocation to support a localized semiconductor supplier. TSMC is the key to building a cutting-edge production line in the United States.TSMC’s major customers are American companies, such as Apple, AMD, Qualcomm, Broadcom, and Nvidia. With the strong commitment and support from both the U.S. federal government and the Arizona state government, TSMC’s new Arizona factory is under construction at full pace. The state-of-the-art 5-nanometer fab is said to come with a monthly production capacity of 20,000 wafers.
Since then, TSMC has devised a plan for its Arizona plant to quickly replicate its plants in Taiwan. The move outlines TSMC’s intention to mirror its comprehensive supply chain in Taiwan to the United States due to concerns over Beijing’s potential invasion.
In addition to exporting talents from Taiwan, TSMC has arranged for more than 100 American engineers to go to its factories in Taiwan for on-site training.
The European Union
On Feb. 9, the European Commission unveiled the European Chips Act, aiming to significantly ramp up semiconductor production within the European Union (EU) and become a global leader in the industry. The Act is a multi-billion euro attempt to secure its supply chains, avert chip shortages, and promote investment in the sector. To achieve that, it will need to bring in key players in Asia and the United States, such as TSMC and Intel, to set up factories in the continent.Under the Act, the commission plans to allocate a total of $49 billion of public and private investment to expand the EU’s global market share of semiconductors from the current 9 percent to 20 percent by 2030.
The commission pointed out the EU’s global market share of semiconductors currently sits at 9 percent and primarily relies on external supply. In the event of a supply chain disruption, chip inventory in parts of Europe’s industrial sectors could run out within weeks, and factories would be forced to slow or halt production.
The Act underlines the EU’s excessive dependence on imports of advanced chips below 7 nm nodes as most of its manufacturing capacity can only produce chips above 22 nm nodes.
Japan
Last November, Japan successfully invited TSMC to set up a factory in Kumamoto, Japan. In a joint venture with Sony Semiconductor Solutions Corporation (SSS), TSMC announced it would provide foundry service with initial technology of 22 to 28-nanometer processes to address strong global market demand for specialty technologies.Although it is not an advanced process fab, TSMC recently announced additional investment in the plant to upgrade its process technology and increase its manufacturing capacity.
In addition, Denso, a supplier of Toyota Motors, plans to invest $350 million to acquire more than 10 percent stake in the new fab, becoming another minority stakeholder. Initially, SSS (Sony) had also provided $500 million to acquire a nearly 20 percent minority stake in the new plant, with TSMC holding the controlling share.
The joint venture with Denso, a component supplier to the world’s largest automotive manufacturer, would mean a long-term and stable supply of semiconductor chips for the Japanese auto industry.
India
India’s Prime Minister Narendra Modi set up a 20-year vision to make India a global leader in the semiconductor industry, and in December, the Indian government announced a $10 billion incentive plan to attract semiconductors and display manufacturers to the country.China
The first country to invite TSMC onboard was China. In 2004, the Taiwanese government gave the green light for TSMC to relocate its “low-tech” eight-inch wafer facilities to Shanghai, which later became TSMC’s first fab in China.In December 2015, Beijing persuaded TSMC to set up a 12-inch wafer fab in Nanjing, China. The factory was based on the 12 nm and 16 nm processes—considered advanced at the time—and was completed in October 2018.
However, the Trump administration placed Huawei on a trade blacklist in May 2019 over national security concerns, adding SMIC in December 2020 for the company’s alleged links to the Chinese military.