Name: TSMC: How a Taiwanese chipmaker became a linchpin of the global economy
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TSMC: How a Taiwanese chipmaker became a linchpin of the global economy

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When Li Ta-sen was a little boy, he used to walk to school through fields of sugarcane taller than himself. Some 40 years later, he is making a living by selling-off the same fields as a property boom takes hold in his hometown of Shanhua.The reason for the construction frenzy in the once shabby rural town in southern Taiwan is simple: the arrival of the world’s most advanced chip factory.Taiwan Semiconductor Manufacturing Company, the largest contract chipmaker in the world, is building a plant to make 3 nanometer chips, semiconductors expected to be up to 70 percent faster and more power-efficient than the most advanced in production now and which will be used in devices from smartphones to supercomputers.“Prices for the adjacent agricultural land tripled last year, and we had the highest transaction volume in our 10-year history,” says Li, who runs the local branch of real estate broker Century 21 and has watched TSMC engineers snap up newly built apartments and townhouses.But the impact of TSMC’s new fabrication plant, or “fab,” radiates far beyond southern Taiwan. In the world of semiconductors, this is the center of the universe.The plant, due to start mass production next year, will use process technology that so far only TSMC and South Korea’s Samsung Electronics have mastered—at present, the most advanced chips are 5 nm. The new chips bring huge advantages for customers: the smaller the transistors on a chip, the lower the energy consumption and higher the speed.Measuring 160,000 square meters, the size of 22 football fields, the plant is commensurate with TSMC itself: a hulk with a stranglehold on global semiconductor manufacturing.Normally a low-key company, TSMC’s massive investment in cutting-edge technology and growing influence are quietly drawing it into the limelight.At a time when a global chip shortage has forced slowdowns or even suspensions of car production from Japan to Europe and America, and with politicians in many countries making noises about bringing more manufacturing onshore, the Taiwanese company’s dominant position in global chip production is attracting attention.Given that China retains a standing threat of invasion of Taiwan, the country has long been at the center of the military rivalry between Washington and Beijing in east Asia. But it is also increasingly being caught up in the technological competition between the two superpowers.China’s companies have been unsuccessful in their bid to match TSMC’s manufacturing prowess, but the US has also started to struggle: Intel is set to outsource some production of processors, its crown jewel, to the Taiwanese company. In Washington, the Pentagon has been quietly pressing for the US to invest more in advanced chipmaking so that its weapons are not dependent on foreign manufacturers.All of that makes TSMC possibly the most important company in the world that few people have heard of.While many governments would love to be able to mimic its success, they are likely to find the costs of trying to match TSMC prohibitive. And its customers are beginning to realize they are not dealing with a traditional supplier.“The automakers very much believe they are the giants in the world,” says Ambrose Conroy, founder and chief executive of Seraph, a supply-chain consultancy. “But this is a situation where the semiconductor manufacturers are the giants, and the automotive purchasing teams are the ants.”TSMC has long gone largely unnoticed because the semiconductors it manufactures are designed and sold in products by branded vendors such as Apple, AMD, or Qualcomm. Yet the company controls more than half of the world market for made-to-order chips.And it is getting more dominant with every new process technology node: while it only accounts for 40 to 65 percent of revenues in the 28-65 nm category, the nodes used for producing most car chips, it has almost 90 percent of the market of the most advanced nodes currently in production.“Yes, the industry is incredibly dependent on TSMC, especially as you get to the bleeding edge, and it is quite risky,” says Peter Hanbury, a partner at Bain &amp; Company in San Francisco. “Twenty years ago there were 20 foundries, and now the most cutting-edge stuff is sitting on a single campus in Taiwan.”Since every new node of process technology requires more challenging development and bigger investment in new production capacity, other chipmakers have over the years started focusing on design and left production to dedicated foundries such as TSMC.The steeper the cost became for new fabrication units the more other chipmakers started to outsource, and the more TSMC’s competitors in the pure-play foundry market dropped out of the race.This year, TSMC upped its forecast for capital investment to a whopping $25 billion-28 billion—potentially 63 percent more than in 2020 and putting it ahead of both Intel and Samsung. Analysts believe that includes at least some investment in capacity the Taiwanese manufacturer needs to supply Intel. The US chipmaker is forced to outsource part of its processor production because it has struggled to master two successive process technology nodes—10 nm and 7 nm—in time to make its own chips.Intel’s stumble on the second successive generation of manufacturing technology triggered a call from an activist investor last year for the company to abandon chip manufacturing by switching to a “fabless” business model, as so many other chipmakers have done.Pat Gelsinger, Intel’s new chief executive, rejects that idea. “Confidence in 7 nanometer is increasing,” he told investors and journalists in a video message on Tuesday. He said the company was increasing its engagement with TSMC and other foundries and outsourcing the manufacturing of some processors to TSMC.Despite Gelsinger’s pledge to resurrect Intel’s manufacturing prowess, the company needs TSMC at least for a transition period in order to stop losing market share for central processing units—the heart of every computer and server—to its rival AMD.According to two people familiar with TSMC and Intel, the US company has had a team working with TSMC for more than a year to prepare outsourced production of CPUs at the new Tainan fabrication plant.Mark Li, a chip industry analyst at Bernstein, estimates that Intel will outsource 20 percent of its CPU production to TSMC in 2023, and the Taiwanese company needs to invest about $10 billion in capacity for that alone.The prohibitive cost has made it increasingly difficult for other companies to stay in the game of advanced chip manufacturing. But as the Intel example shows, money is not the only factor. Shrinking the size of transistors—the key feature necessary for cramming ever more components into one chip, which in turn allows continued cost and energy efficiency—is becoming a challenging feat of engineering.The transistor size in a 3 nm node is just 1/20,000th of a human hair. The tweaks to machinery and chemicals needed to achieve this come more easily with the single-minded focus on this manufacturing technology, the large scale and broad range of applications that TSMC has developed.You must to comment.

When Li Ta-sen was a little boy, he used to walk to school through fields of sugarcane taller than himself. Some 40 years later, he is making a living by selling-off the same fields as a property boom takes hold in his hometown of Shanhua.The reason for the construction frenzy in the once shabby rural town in southern Taiwan is simple: the arrival of the world’s most advanced chip factory.Taiwan Semiconductor Manufacturing Company, the largest contract chipmaker in the world, is building a plant to make 3 nanometer chips, semiconductors expected to be up to 70 percent faster and more...

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Kathrin Hille

Ars Technica is a website covering news and opinions in technology, science, politics, and society, created by Ken Fisher and Jon Stokes in 1998. It publishes news, reviews, and guides on issues such as computer hardware and software, science, technology policy, and video games. Many of the site's writers are postgraduates and some work for research institutions. Articles on the website are written in a less-formal tone than those in traditional journals. Ars Technica was privately owned until May 2008, when it was sold to Condé Nast Digital, the online division of Condé Nast Publications.

TSMC: How a Taiwanese chipmaker became a linchpin of the global economy

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