TSMC's deployments have been designed to minimize geopolitical risks, according to industry sources. The world's number-one pure-play foundry house is leading in advanced chip manufacturing capabilities, keeping its R&D base at home in Taiwan, while accelerating its overseas capacity expansions for 3nm to 28nm processes.
Advanced Micro Devices (AMD) CEO Lisa Su recently told a Japanese media outlet that the company will "consider other manufacturing capabilities" outside of TSMC to ensure that AMD has "the most resilient supply chain."
Some have interpreted Su's response to mean AMD might possibly transfer orders to Samsung Electronics or Intel; however, TSMC has established a significant lead over Samsung and Intel, realistically making it the only option for customers.
By building fabs in China, the US, Germany, and Japan, TSMC customers will be able to choose where to manufacture, including Taiwan, based on their needs, sources said.
While it is true that it is impossible to separate TSMC from the tensions in the Taiwan Strait, sources pointed out that the situations in South Korea, China, the US, and Europe are also not 100 percent stable.
Market observers believe TSMC's profitability will be weighed down by massive overseas construction and operating costs. However, TSMC has a response strategy in place, which includes seeking the maximum amount of government subsidies from locations it plans to build. Most importantly, TSMC has informed the local governments and all customers that it will adjust its foundry pricing strategies.
Although the semiconductor market in 2023 is weak and is not expected to rebound until 2024, it is understood that TSMC's foundry prices will continue to rise. As such, TSMC remains confident that its long-term gross margin will exceed 53%. TSMC estimates revenue in USD will only fall 10% in 2023.
Thus far, the challenges TSMC has faced with its overseas expansion were all anticipated, according to sources. TSMC has sent personnel from Taiwan to the US due to a shortage of local specialists familiar with installing the equipment, as the new US plant enters the most critical stage of processing and installing the most advanced equipment. As a result, mass production at the US fab using the 4nm (N4) technology has been delayed to 2025.
TSMC's first fab in Japan is expected to begin mass production using the 12nm, 16nm, 22nm, and 28nm advanced processes at the end of 2024. In Europe, TSMC is currently in talks with customers and partners to evaluate the possibility of establishing a special process fab focusing on automotive technologies in Germany. TSMC is also expanding its 28nm capacity in Nanjing, China, as planned.
TSMC is planning for 3nm capacity in the US in the future and a second fab in Japan, sources said.
AMD has been working with TSMC since adopting the 7nm process. The two parties have since worked together on the 5nm and 4nm process, and are currently discussing wafer starts with the 3nm process. Transferring orders for the 2nm process will be difficult, sources said.
In terms of AMD's so-called "risk diversification," in addition to production in Taiwan, AMD actually also has the option to use the 4nm and 3nm processes at TSMC's new US fab and possibly 7nm and 5nm processes in Japan, sources added. By accelerating its overseas deployments, sources say TSMC has effectively dismantled its geopolitical risks.
Article translated by Eifeh Strom
