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Taiwanese chipmaker ramping production to end chip shortage


The world is grappling with the issue of an ongoing chip shortageThe quiet leader among chipmakers, has promised to invest $100 billion to increase production over the next three years.

Taiwan Semiconductor Manufacturing CompanyAlthough it may not be well-known, the company is one of the 10 most valued companies in the world. It has a global market value exceeding $550 billion. It is now leveraging all of its resources to return the most sophisticated chip manufacturing technology to America.

CNBC was granted a tour of the $12 million fabrication plant outside Phoenix, Arizona. This is where TSMC plans to start producing 5-nanometer chips by 2024. According to the company, it will be producing 20,000 wafers per month.

These parts will be used at many places. CPUs, GPUs (IPUs), etc. CNBC’s Rick Cassidy stated that they will be in smartphones. Cassidy, TSMC’s chief strategy officer, is also the president/CEO of TSMC’s Arizona project.

TSMC manufactures key components that are used in everything, from cell phones to F-35 fighter planes. NASA’s Perseverance Rover mission to MarsIt is. It announced earlier this month plans to build a factory in Japan that will make chips using older technology for household and car parts. TSMC will also be AppleThe exclusive supplier of advanced chips in every iPhone and Mac computer currently available,.

They are still somewhat in the background in terms of their end markets. According to Joanne Itow of Semico Research, the managing director for manufacturing, Apple receives all the accolades when new phones are released.

“We’re low-key. Our products are our product. Cassidy stated that their success has brought us all we could hope for,” Cassidy added.

The United States is the originator of modern silicon. But for decades, it has lost market share to Asia. In 2020, 79%, according to SEMI (an industry association), the U.S. chip manufacturing sector. According to SEMI, the U.S. made up 12% of all global chip manufacturing in 2017, compared with 37% back in 1990. 

The $12 billion chip fabrication facility for 5-nanometer chips at TSMC in Phoenix is now six months ahead of schedule. It will be completed by September 28th 2021.

TSMC

According to the company, TSMC alone was responsible in 2020 for 24% more semiconductor production than in 2019. This figure is up from 21% in 2019. Research group Capital Economics says that TSMC produces 92% of all the advanced chips for iPhones, supercomputers, automotive AI and other devices. Samsung accounts for the rest, with 8%.

It is “It’s become almost a monopolyAt the forefront, all manufacturing operations that are based in Taiwan or Hsinchu are largely outsourced to Taiwan. This becomes an issue of national significance for the United States but also the Western World,” stated Christopher Rolland (Susquehanna senior semiconductor analyst).

TSMC produces larger chips to support products like electric toothbrushes or coffeemakers, in addition to cutting-edge 3- and 5-nanometer chip technology. The 28- to 40 nanometer chips used by cars are often less sophisticated. The shortage affected all kinds of chips. Carmakers including GM and Toyota have paused productionat certain plants. Apple also available. likely to slash its 2021 production targetsiPhone 13 orders delayed more than a year for some models

First pure-play findry in the world

Investors were skeptical when Morris Chang proposed the concept for TSMC back in 1980s. Chang was born in China, and was educated at Harvard University, MIT, and Stanford. He eventually moved to Taiwan 25 years later. Texas Instruments. The government then asked him to start a Taiwanese company for semiconductors that would be a global leader. His idea: Focus only on manufacturing — what’s now known as a pure-play foundry.

Cassidy stated that “when you focus on one thing you can do it really well”. He was inspired by a meeting with Chang over a period of hours and joined TSMC in 1993.

Chang gambled big on a need which didn’t yet exist. In 1987 when Chang founded TSMC, Texas Instruments and Intel took great pride in their designs and made them. They make their chips. The industry’s old saying was, “Real men have factories.”

Morris was looking for funding. He went to companies he knew and told them that Morris’ idea wouldn’t be funded. “If you can’t get it off of the ground it won’t scale.”

However, as chips became increasingly complex and more expensive to produce, the task of manufacturing them was daunting. An analyst estimates that it would take at most two years to construct a factory today, and cost $10 billion. It’s become nearly impossible for even the biggest chip companies — Intel Nvidia Broadcom Qualcomm AMD — to do it all and keep up with the most advanced tech. For example, Intel still creates and manufactures its own chips but has fallen behind TSMC and Samsung in recent years. It now depends on TSMC for some of its chips. 

Rolland explained that if you are a good designer, it doesn’t take billions and millions of dollars to get started with TSM.

Each major step in chipmaking can be handled separately. Arm is one example. MIPSFocus on IP and Architecture, which provide the building blocks for design chips. Electronic design automation companies, such as Cadence SynopsysThey create the software that designs chips. Only one company. ASMLThe extreme ultraviolet light machines costing $180million to ink designs onto the top-of-the-line chips are made by. You can also find the highly-respected fabless firms that design the chips such as AppleQualcomm, Nvidia, and many other companies.

An illustration of ASML’s ultra ultraviolet light machine that etch designs onto the highest-tech chips

ASML

These fabless firms grew and TSMC became a major player in the production of chips worldwide.

“This is what has allowed [TSMC]Rolland stated that they were “one of 10 most important companies by market capital.”

TSMC became the first Taiwan-based company to be listed on Taiwan Stock Exchange’s 1994 stock exchange. In the early 2000s it was in line with other 20 companies that made the best chips of the day. It was as the tech kept advancingAs a result, companies began to fall behind. Today there are only two companies left that make 5-nanometer, advanced chips: TSMC or Samsung.

Apple began relying more on TSMC in 2013 to produce its A-series A-series chip for the iPhone. This was as it became less dependent on Samsung (a direct rival) in mobile phone manufacturing. Every iPhone currently has a TSMC chipset. Apple has made significant advancements in this area. away from Intel tooTSMC is now the sole supplier of chips for most Macs.

Chang, at age 86 retired in 2018 as the chairman of TSMC. Chang’s radical idea of pure play foundry continues to be a success. With the opening of a new fab in Taiwan next year, TSMC is in a race with Samsung to make the world’s first 3-nanometer chips — with Intel planning to get there by 2025

5-nanometer brought to the U.S.

5 nanometer chips are not possible at the moment in America. TSMC intends to change this.

You need to create more fabs in order to have more capacity. Cassidy stated that this is one reason we are moving to the U.S. “Our customers desire us in the U.S. We are wanted by the U.S. government.”

TSMC Technical Director Tony Chen took CNBC on a tour of the site where a four-story 2.3-million-square-foot fab is being erected. In his 23-year tenure with TSMC, Chen led 17 other fab building projects. 

“This project has been designed for a 5-nanometer fabrication line. Chen stated that it is a replica of the Taiwanese fab. 

One of the largest cranes in the world was being elevated to 200 feet near by. It was transported to the site by 153 semitrucks. Jim White, site supervisor, stated that contractors have moved almost 4 million cubic yards dirt since April and used over 260 million gallons water.

It takes a lot of water to build fabs and make chips. This is not an easy task in the middle desert. Arizona has its largest source of water from groundwater. deep wells at big farms are using water up faster than it’s naturally replenished. Chen stated that TSMC requires approximately 4.7 million gallons water per day in order to sustain production. 

TSMC has never been in water scarcity. Taiwan is facing its worst drought in 56 yearsTSMC stated that this has not affected production. TSMC claims that Arizona has an on-site water treatment centre which can recycle as much as 90% of the water it uses at its fab.

Chris Camacho (president and CEO, Greater Phoenix Economic Council) stated that the water would be reinjected in the aquifer by the city of Phoenix. He was a key figure in the negotiation of the agreement that brought the project to Arizona.

A second problem is the fact that 5 nanometer specialists are mostly based in Asia. Roxanna Vega (TSMC’s academic affairs manager) stated that the company plans to bring some of its most respected experts from Taiwan.

“They’re subject matter specialists on what they do over there in our fabs,” Vega explained. “It will be a temporary assignment… maybe two to three years.”

TSMC stated that it has already sent over 250 U.S. employees to Taiwan in the past 12-18 months.

“The chance to train at our 5-nanometer gigafab, Taiwan is to give them an insight into how vast and state-of-the art the tools and machinery are going to be in Arizona,” Vega stated.

Diversification plays a crucial role in TSMC’s ability to provide advanced manufacturing services to the U.S.

Rolland explained that Taiwan’s analog semiconductor design is a weak area. By moving to the United States, one would be able access a greater number of analog engineers.

Workers at TSMC take a walk down a hall in a Taiwanese Chipmaking Fab.

TSMC

TSMC has 12 fabs in Taiwan and China. This makes the world more vulnerable to natural disasters like the drought or geopolitical tensions. However, some experts refer to TSMC in Taiwan as Taiwan’s “silicon defense” due to its complicated relationship with China.

The media paints a very bleak picture of this situation,” Rolland said, “but I’m actually much more optimistic — in part because of this idea [of]The semiconductor shield is a result of the mutually beneficial relationships between Taiwan and the mainland. China currently needs them to support their cutting-edge manufacturing.

The U.S. also depends heavily on the chips coming out of Taiwan — a key reason the government worked hard to convince TSMC to bring its tech here.

The Arizona State University offers a variety of programs including the Qualified Facility tax creditAnd the Quality Jobs tax credit,Camacho stated that this is a real incentive to lower operating costs. The city of Phoenix also created a $200 million infrastructure package to help TSMC get water and other infrastructure.

It Biden administration has proposed $52 billion in subsidiesTSMC and other chip companies can manufacture in the United States.

Industry reports estimateThe U.S. government will invest $50 billion to build 19 new fabs within the country over the next 10 year, effectively increasing domestic chip production capacity by doubling its size.

Similar investments around the globe are being made as a result of the continuing shortage. Industry association SEMI projects 72 new fabs or major expansions will come online by 2024 — 10 of them located in North and South America.

Ajit Manocha, SEMI CEO and President said that he heard about more investments announcements in the past two-three years than any other time in his entire life. Based on this, we believe we will see some relief in the chip shortage by the end of next fiscal year.

TSMC will continue to increase chip prices to meet rising demand, up to 20% according to a reportThe Wall Street Journal. Consumers could see a drop in price for electronics as a result. TSMC also has a number of benefits. continuing to ramp up production capacityThere is plenty of room on the Arizona 1,100-acre site for another phase, even in the U.S.

You can see the entire tour at TSMC’s Arizona facility and the massive fabs of the chip giant in Taiwan by watching the video.

Mike Robinson
Mike covers the financial, utilities and biotechnology sectors for Street Register. He has been writing about investment and personal finance topics for almost 12 years. Mike has an MBA in Finance from Wake Forest University.