For TSMC, being the world's largest foundry with nearly 500 customers has its peculiarities. On the one hand, the company can serve almost any client with almost any requirements. On the other hand, it has to stay ahead of everyone else both in terms of capacity and in terms of technology. As far as capacity is concerned, TSMC is unchallenged and is not going to be for years to come. As for fabrication technologies, TSMC has recently reiterated that it's confident that its N2, N3, and N4 processes will be available on time and will be more advanced than competing nodes.

Confidence

Early this year TSMC significantly boosted its 2021 CapEx budget to a $25 – $28 billion range, further increasing it to around $30 billion as a part of its three-year plan to spend $100 billion on manufacturing capacities and R&D.

About 80% of TSMC's $30 billion capital budget this year will be spent on expanding capacities for advanced technologies, such as 3nm, 4nm/5nm, and 6nm/7nm. Analysts from China Renaissance Securities believe that most of the money on advanced nodes will be used to expand TSMC's N5 capacity to 110,000 ~ 120,000 wafer starts per month (WSPM) by the end of the year. Meanwhile, TSMC said that 10% of its CapEx will be allocated for advanced packaging and mask making, whereas another 10% will be spent on specialty technologies (which includes tailored versions of mature nodes).

TMSC's the most recent CapEx hikes announcements were made after Intel announced its IDM 2.0 strategy (that involves in-house production, outsourcing, and foundry operations) and to a large degree reaffirms TMSC's confidence in both short-term and long-term future even ahead of intensified competition.

"As a leading pure-play foundry, TSMC has never been short on competition in our 30-plus-year history, yet we know how to compete," said C.C. Wei, president and CEO of TSMC, at a recent conference call with analysts and investors. "We will continue to focus on delivering technology leadership, manufacturing excellence, and earning our customers' trust. The last point, customers' trust, is fairly important because we do not have internal products that compete with customer."

Advertised PPA Improvements of New Process Technologies
Data announced during conference calls, events, press briefings and press releases
  TSMC
N7
vs
16FF+
N7
vs
N10
N7P
vs
N7
N7+
vs
N7
N5
vs
N7
N5P
vs
N5
N4
vs
N5
N3
vs
N5
Power -60% <-40% -10% -15% -30% -10% lower -25-30%
Performance +30% ? +7% +10% +15% +5% higher +10-15%
Logic Area

Reduction %

(Density)


70%


>37%


-


~17%
0.55x

-45%

(1.8x)


-
? 0.58x

-42%

(1.7x)
Volume
Manufacturing
2018 2018
 
2019 Q2 2019
 
Q2 2020 2021 2022 H2 2022

N5 Gaining Customers

TSMC was the first company to start high volume manufacturing (HVM) of chips using its N5 (5 nm) process technology in mid-2020.

Initially, the node was used solely for TSMC's alpha customers — Apple and HiSilicon. Shipments to the latter ceased on September 14, which left all of the leading-edge capacity to Apple. By now, more customers are ready with their N5 designs, so the adoption of this node is growing. Meanwhile, TSMC says more customers are planning to use N5 family of technologies (including N5, N5P, and N4) than it expected just several months ago.

"N5 is already in its second year of volume production with yield better than our original plan," said Mr. Wei. N5 demand continues to be strong, driven by smartphone and HPC applications, and we expect N5 to contribute around 20% of our wafer revenue in 2021. […] In fact, we are seeing stronger engagement with more customers on 5 nm and 3 nm [versus 7 nm at similar stages]. The engagement is so strong that we have to really prepare the capacity for it."

For TSMC, HPC applications include many different types of products, including AI accelerators, CPUs, GPUs, FPGAs, NPUs, and video gaming SoCs, just to name a few. Since they're just a contract manufacturer, TSMC does not disclose what kinds of products it makes using one node or another (we do know that it builds the Apple A14 SoC for smartphones/tablets/STBs as well as the Apple M1 SoC for PCs and tablets), but the very fact that adoption of N5 is growing in the HPC segment is important.

"We expect demand for our N5 family to continue to grow in the next several years, driven by the robust demand for smartphone and HPC applications," the head of TSMC said. "We expect to see HPC, not only in the first wave, but in additional waves of demand to support our leading [N5] node in the future, actually."

It is not particularly surprising that TSMC's N5 is gaining market share among adopters of leading-edge technologies. Analysts from China Renaissance estimate that TSMC's N5 features a transistor density of around 170 million transistors per square millimeter (MTr/mm2), which if accurate, makes it the densest technology available today. By contrast, Samsung's Foundry's 5LPE can boast with about 125 MTr/mm2 ~130 MTr/mm2, whereas Intel's 10 nm features an approximately 100 MTr/mm2 density.

In the coming weeks TSMC is set to start making chips using a performance-enhanced version of its N5 technology called N5P that promises to increase frequencies by up to 5% or reduce power consumption by up to 10% (at the same complexity). The technology offers a seamless migration path for customers without requiring significant engineering resource investment or longer design cycle time, so anyone with an N5 design can use N5P instead. For example, early adopters of N5 could re-use their IP for their N5P chips.

N4: On Track for Next Year

TSMC's N5 family of technologies also includes evolutionary N4 process that will enter risk production later this year and will be used for mass production in 2022.

This technology is set to provide further PPA (power, performance, area) advantages over N5, but keep the same design rules, design infrastructure, SPICE simulation programs, and IPs. Meanwhile, since N4 further extends usage of EUV lithography tools, it also reduces mask counts, process steps, risks, and costs.

"N4 will leverage the strong foundation of N5 to further extend our 5 nm family," said Mr. Wei. "N4 is a straightforward migration from N5 with compatible design rules while providing further performance, power and density enhancement for the next wave of 5-nanometer products. N4 risk production is targeted for second half this year and volume production in 2022."

By the time N4 enters HVM in 2022, TSMC will have about two years of experience with N5 and three years of experience with EUV. So expectations are that yields will be high and the performance variability promises to be low.

But even as cutting-edge as N4 is slated to be, it's not going to be the most advanced fabrication technology that TSMC will offer next year.

N3: Due in H2 2022

In 2022, the world's largest contract maker of chips will roll out its brand-new N3 manufacturing process, which will keep using FinFET transistors, but is expected to offer the whole package of PPA improvements.

In particular, versus their current N5 process, TSMC's N3 promises to increase performance by 10% – 15% (at the same power and complexity) or reduce power consumption by 25% – 30% (at the same performance and complexity). All the while the new node will also improve transistor density by 1.1 ~ 1.7 times depending on the structures (1.1X for analog, 1.2X for SRAM, 1.7X for logic).

N3 will further increase the number of EUV layers, but will keep using DUV lithography. Also, since the technology keeps using FinFET, it will not require a new generation of electronic design automation (EDA) tools redesigned from scratch and development of all-new IPs, which might become a competitive advantage over Samsung Foundry's GAAFET/MBCFET-based 3GAE.

"N3 will be another full node stride from our N5 and will use FinFET transistor structure to deliver the best technology maturity, performance, and cost for our customers," said Mr. Wei. "Our N3 technology development is on track with good progress. We continue to see a much higher level of customer engagement for both HPC and smartphone applications at N3 as compared with N5 and N7."

In fact, TSMC's claims about growing customer engagement with N3 indirectly telegraphs its high expectations for N3.

"[N3] risk production is scheduled in 2021," said TSMC's CEO. "The volume production is targeted in second half of 2022. Our N3 technology will be the most advanced foundry technology in both PPA and transistor technology, when it is introduced. […] We are confident that both our [N5] and [N3] will be large and long-lasting nodes for TSMC."

Beyond N3

Gate-all-around FETs (GAAFETs) are still a part of TSMC's development roadmap. The company is expected to use a new kind of transistors with its 'post-N3' technology (presumably N2). In fact, the company is in path-finding mode for next generations of materials and transistor structures that will be used many years down the road.

"For advanced CMOS logic, TSMC’s 3nm and 2nm CMOS nodes are progressing nicely through the pipeline," the company said in its annual report recently. "In addition, TSMC's reinforced exploratory R&D work is focused on beyond-2nm node and on areas such as 3D transistors, new memory and low-R interconnect, which are on track to establish a solid foundation to feed into many technology platforms.

It is noteworthy that TSMC is expanding capacity for R&D operations at Fab 12, where N3, N2, and more advanced nodes are currently being researched and developed.

Summary

Overall, TSMC is confident that its "everyone's foundry" strategy will enable it grow further in terms of scale, market share, and sales. The company also expects to maintain its technology leadership going forward, which is pivotal for growth.

"For the full year of 2021, we now forecast […] foundry industry growth [at] about 16%," said Wendell Huang, CFO of TSMC, at a recent conference call with analysts and investors. "For TSMC, we are confident we can outperform the foundry revenue growth and grow by around 20% in 2021."

The company has a strong technology roadmap and it is set to continue introducing improved leading-edge nodes every year, thus offering its customers improvements at a predictable cadence.

TSMC knows how to compete against rivals with leading-edge nodes as well as makers of chips focused on specialty process technologies, so it does not see Intel Foundry Services (IFS) as an immediate threat especially because the blue giant is going primarily after leading-edge and advanced nodes.

Financial analysts generally share TSMC's optimism mainly because of the expectation that the company's N3 and N5 nodes are not going to have competitors offering similar transistor densities and wafer starts.

"Following Intel's announced foundry comeback in March, TSMC’s willingness to set a 3-year $100 billion CapEx/R&D investment plan, starting from 2021, indicates its confidence to widen its foundry leadership," Szeho Ng, an analyst with China Renaissance Securities. "We see TSMC’s strategic value rising with N3/N5: strong N5 tape-out activities from HPC/smartphone applications and more N3 client engagement vs N5/N7 at similar stages."

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  • CiccioB - Monday, April 26, 2021 - link

    Probably because AMD is (still) a small customer for TSMC.
    You may be surprised to know that despite the quantities and numbers of CPU/SoC/GPU/APU AMD has made in 2021, Intel contribution to TSMC's revenue is just a bit smaller. In 2019 it was even bigger.
    AMD is 7% of TSMC revenue, while Intel 6%. Against Apple 24% of contribution to TSMC revenue, they are both dwarfs. That is why AMD is not named here. Before it there are Broadcom, Qualcomm and even Nvidia...

    This year AMD is foreseen to make the jump to become the second TSMC's customer, thanks also to the plan to produce Xilinx (now AMD) FPGAs on TSMC advanced nodes. But that just means that AMD will go from 7% to a bit more than 9% of TSMC's total revenue. Which is still a dwarf against over 25% of Apple and just a bit more than Intel (about 7%).
    But it then will finally surpass Nvidia in the race of the big TSMC customer as it appears Nvidia will move to Samsung for production even more than before (probably TSMC is going to be really too tight in supply quantities).

    Apart the numbers given here, what is missing is the foreseen number of wafer the customer have requester to TSMC and how many they are ready to serve them.
    Because having a good PP (the best one even) but not being able to satisfy customer's supply needs means that some of them will be disappointed nonetheless (a lost sale is a loss of money) and some may recur to worse PP but larger supply.
    See Intel and its immortal 14nm PP, it may be behind TSMC 7nm, but it guarantees Intel to satisfy any mass volume request of their chips, something AMD cannot and we have seen what this meant to their notebook series (where are series 4000 APU and 6000 (but also 5000) mobile GPUs?). They may be good, even marvelous on paper, but if they can't supply the OEM, these ones can only produce with Intel chips and sell these only devices leaving AMD waiting for TSMC to make new chips when they can (and lose money and potential market share).

    And on top of this, seen the capital investments TSMC is going to afford for these new PPs, I doubt these are going to be cheap. The time when AMD could fight against Intel with the weapon of price dumping (losing money every quarter) has ended, but seen AMD's much smaller gross profit than Intel's I see a quite difficult period for the former to improve profitability by using the latest and more advanced PP to stay ahead in all markets (CPUs and GPUs).
    Nvidia produces more paying less. Amd Intel is going to use their 10nm SFE PP at full power at the end of the year. We will see how this race towards the best and more advanced to stay afloat will pay off.
    Reply
  • Matthias B V - Tuesday, April 27, 2021 - link

    I guess it is less about capacity than early adopting and price. Or a mix of both as AMD might be 2nd biggest but not as big as Apple [yet].

    Also Apple will always be first adoper as they can start using a new node on their A-series mobile chips that are small and do not need high frequencies and therefore perfect for a less mature node. AMD even with chiplets might not be able to do that and only follows...

    Also early capacity is low and prices high so Apple outpays AMD on new nodes while AMD follows a year or two after Apple moves on.

    Remember we talk about newes nodes and not who is most important TSMC customer.
    Reply
  • melgross - Tuesday, April 27, 2021 - link

    No. Apple is by far, their largest customer, additionally, it’s been mentioned in various places, that Apple pretty much funded TSMC’s 5nm node. That is likely to continue with the smaller nodes. Reply
  • name99 - Monday, April 26, 2021 - link

    "and earning our customers' trust. The last point, customers' trust, is fairly important because we do not have internal products that compete with customer."

    Now why on earth would he feel it necessary to push that point...
    (Will be interesting to see if this becomes a recurring theme in TSMC's communication.)
    Reply
  • Rudde - Tuesday, April 27, 2021 - link

    Because it sets TSMC apart from Samsung and Intel. Reply
  • name99 - Wednesday, April 28, 2021 - link

    Oh dude, can you not spot sarcasm in a post? Reply
  • Oxford Guy - Tuesday, April 27, 2021 - link

    For the same reason PC gamers need to wise-up and buy a clue when it comes to how AMD competes directly against them via the console scam. Reply
  • melgross - Tuesday, April 27, 2021 - link

    Because with Samsung mostly producing their own chips, and Intel opening it’s foundry to most others, there are questions as to who is really go8ng to get the best technology from either—their own designs, which therefor are the most profitable for then? Or, a customer’s, where the profit only from the manufacturing?

    There is a question about Nvidia with their purchase of ARM over this very same reason, and one of the reasons why Apple sold its one third share of ARM stock (the other major one was financial) in the early 2000’s
    Reply
  • name99 - Monday, April 26, 2021 - link

    "Following Intel's announced foundry comeback in March, TSMC’s willingness to set a 3-year $100 billion CapEx/R&D investment plan, starting from 2021, indicates its confidence to widen its foundry leadership,"

    That $100B sounds impressive. Which is why I present to you:
    https://www.apple.com/newsroom/2021/04/apple-commi...
    WTF will Apple be spending all that money on? The items they actually list are chicken feed compared to that total. Even a few data centers barely move the needle.

    Two obvious answers are
    - Apple car... I always assumed contract manufacturing in China, but maybe Apple has concluded that's now just too much risk?

    - (relevant to this article) Are they fronting much of the money for TSMC's expansion? They did this years ago with Foxcon, buying masses of things like aluminum milling machines. I could see Apple providing the money for new fabs and EUV machines, in return for guaranteed first crack at them for many years, with some sort of gradual reversion of ownership to TSMC over time.
    Reply
  • melgross - Tuesday, April 27, 2021 - link

    I don’t know the numbers, but Apple has financed tsmc’s 7nm and 5nm nodes. Not just with money directly, but as with other companies, including Samsung, sharp, Foxconn and a number of others, both large and small, with actual machinery, worker training and more.

    Apple receives as a result, first guaranteed access, lower pricing and a partial say in where the companies are going in their R&D and production. This works out well, as long as the companies can fulfill their part of the deal. They can use the machinery for other customers as long as Apple’s needs are met.

    Pretty good deal, really.
    Reply

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