When Li Ta-sen was a little boy, he walked to school through fields of sugar cane bigger than himself. Some 40 years later, he makes a living selling the same fields as a real estate boom in his hometown of Shanhua.
The reason for the building 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 chip maker in the world, is building a factory to make 3-nanometer chips, semiconductors expected to be up to 70 percent faster and more energy efficient than the most advanced currently in production that will be used in devices from smartphones to supercomputers.
“Prices for the adjacent farmland tripled last year and we had the highest transaction volume in our 10-year history,” said Li, who leads the local branch of real estate broker Century 21 and has watched TSMC engineers purchase 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 factory, which will begin mass production next year, will use process technology so far mastered only by South Korea’s TSMC and Samsung Electronics – the most advanced chips at the moment are 5nm. The new chips bring enormous benefits to customers: the smaller the transistors on a chip, the lower the power consumption and the higher the speed.
With an area of 160,000 square meters, the size of 22 football fields, the factory is comparable to TSMC itself: a behemoth with a stranglehold on global semiconductor manufacturing.
Normally a quiet company, TSMC’s massive investment in cutting edge technology and growing influence is quietly pulling it into the limelight.
At a time when a global chip shortage has led to delays or even suspensions of car production from Japan to Europe and America, and with politicians in many countries making noises to bring more production to land, the Taiwanese company’s dominance is receding. global chip production draws attention .
As China retains a permanent threat of invading Taiwan, the country has long been at the center of Washington-Beijing military rivalry in East Asia. But it is also becoming increasingly entangled in the technological competition between the two superpowers.
Chinese companies have failed to match TSMC’s manufacturing capabilities, but the US is also starting to struggle: Intel plans to outsource some of its crown jewel processor production to the Taiwanese company. In Washington, the Pentagon has quietly urged the US to invest more in advanced chip manufacturing so that its weapons are not dependent on foreign manufacturers.
All that makes TSMC possibly the most important company in the world that few people have heard of.
While many governments are eager to emulate its success, they will likely find the cost of trying to emulate TSMC prohibitive. And her customers are beginning to realize that they are not dealing with a traditional supplier.
“The automakers believe they are the giants of the world,” said Ambrose Conroy, founder and CEO of Seraph, a supply chain consultancy. “But this is a situation where the semiconductor manufacturers are the giants and the car purchasing teams are the ants.”
TSMC has long gone largely unnoticed because the semiconductors it produces are designed and sold in products by branded suppliers such as Apple, AMD or Qualcomm. Still, the company controls more than half of the global market for made-to-order chips.
And it’s becoming more dominant with each new process technology node: While it only accounts for 40 to 65 percent of revenue in the 28-65nm category, the nodes used to manufacture most automotive chips, it has nearly 90 percent of its revenue. percent of the market of the most advanced nodes currently in production.
“Yeah, the industry is incredibly reliant on TSMC, especially when you’re on the edge, and it’s pretty risky,” said Peter Hanbury, a partner at Bain & Company in San Francisco. “Twenty years ago there were 20 foundries, and now the most advanced equipment is on a single campus in Taiwan.”
As each new node of process technology requires more challenging development and greater investment in new production capacity, other chipmakers over the years have begun to focus on design and leave production to dedicated foundries such as TSMC.
The higher the cost for new manufacturing units, the more other chipmakers began to outsource, and the more TSMC’s competitors in the pure-play foundry market dropped out of the race.
This year, TSMC raised its capital investment forecast to a whopping $25 billion-28 billion — potentially 63 percent more than in 2020 and with it for both Intel and Samsung. Analysts believe this includes at least some investment in capacity that the Taiwanese manufacturer needs to provide Intel. The US chipmaker has been forced to outsource some of its processor production as it struggled to master two successive process technology nodes — 10 nm and 7 nm — in time to make its own chips.
Intel’s stumbling over second-consecutive-generation manufacturing technology led last year to a call from an activist investor for the company to halt chip production by switching to a “fabulous” business model, as so many other chipmakers have done.
Pat Gelsinger, Intel’s new CEO, rejects that idea. “Confidence in 7 nanometers is on the rise,” he told investors and journalists in a video message on Tuesday. He said the company is increasing its involvement with TSMC and other foundries and is outsourcing the production of some processors to TSMC.
Despite Gelsinger’s promise to revive Intel’s manufacturing capabilities, the company needs TSMC at the very least for a transition period to avoid losing market share for central processing units — the heart of every computer and server — to its rival AMD.
According to two people who are familiar with TSMC and Intel, the US company has had a team working with TSMC for more than a year to prepare the outsourced production of CPUs at the new factory in Tainan.
Mark Li, a chip industry analyst at Bernstein, estimates that Intel will outsource 20 percent of its CPU production to TSMC by 2023, forcing the Taiwanese company to invest about $10 billion in capacity alone.
The prohibitive costs have made it increasingly difficult for other companies to stay in the game of advanced chip manufacturing. But as Intel’s example shows, money isn’t the only factor. Reducing the size of transistors — the key feature needed to cram more and more components into a single chip, which in turn enables continued cost and energy efficiency — is becoming a challenging engineering feat.
The transistor size in a 3nm knot is only 1/20,000th of a human hair. The adjustments to machinery and chemicals required 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.