Last week, TSMC released its results for the first quarter of this year. When talking about the topic of production capacity, Wei Zhejia, president of the company, said that the shortage of production capacity in the semiconductor industry will continue into next year, and mature processes are more likely to be in short supply until 2022. In the case of a serious shortage of mature process capacity in the world, TSMC has also rarely expanded its mature process capacity. Wei Zhejia said that it is expected that the shortage of mature processes will continue this year and next year. The company’s new capacity will not be released until 2023, when it will be able to provide more capacity to customers and ease the tight production capacity of mature processes.
As a global foundry leader, TSMC has a market share of about 56%. What’s more powerful is that the company is not only far ahead of the industry in advanced processes, but also ranks first in the field of mature process foundries.
Advanced manufacturing process is on the rise
According to TrendForce statistics, in the first quarter of this year, TSMC’s 5nm process revenue contribution is expected to maintain nearly 20%, and the 7nm process demand is strong. In the first quarter, TSMC’s overall revenue will reach a new high, with an annual increase of about 25%.
From the first quarter financial report released by TSMC, it is basically in line with the forecast: the net profit after tax in a single quarter was NT$139.69 billion, a quarterly decrease of 2.2% and an annual increase of 19.4%; Goods accounted for 14% of total sales, 7nm accounted for 35%, 16nm accounted for 14%, and 28nm accounted for 11%.
In terms of advanced process capacity of 12-inch wafers, TSMC is the only one, and in the past year, AMD has the fastest growing demand for its capacity, especially 7nm orders, due to AMD’s ZEN 2 and the upcoming ZEN 3 Architecture CPUs are based on the 7nm process, and the company’s growth momentum in the CPU market is very strong. In addition, AMD’s GPU is also produced by TSMC, and it is still based on the 7nm process. These make TSMC’s related production capacity more and more tight.
The news from the supply chain shows that because MediaTek cannot continue to supply mobile phone chips to Huawei, the former 7nm process chips that were originally going to be put into TSMC have been suspended, thus releasing about 13,000 pieces of 12-inch wafer foundry capacity, while This part of the gap is likely to be filled by AMD. The market expects that Sony and Microsoft’s new generation of game opportunities will be out of stock by mid-2021, so AMD’s customized CPU and GPU “money” for these two major customers is optimistic.
TSMC’s annual investment in advanced process capacity expansion is no less than 10 billion US dollars. It has now been determined that the first to third phases of Nanke F18 plant are 5nm production bases. The first and second phases have been mass-produced, and the third phase is being installed. It is estimated that by 2022, its 5nm production capacity will triple compared to 2020. The 4~6 phase of the Fab18 factory is a 3nm base, which is currently under construction. At the same time, Nanke will also build a special process and advanced packaging factory. Based on this, TSMC’s revenue growth trend will continue.
This year, TSMC is expected to invest 30 billion US dollars, of which 80% will be used for advanced processes such as 3nm, 5nm and 7nm, 10% will be used for mass production requirements of advanced packaging technology, and 10% will be used for special processes. It can be seen that TSMC’s investment is mainly used for advanced processes.
The mature process field is also the overlord
Not long ago, Counterpoint Research gave the top list of global wafer foundries sorted by mature process (node ≥40nm) capacity, as shown in the figure below.
It can be seen that the number one manufacturer is still TSMC, with a market share of 28%.
The mature process is very popular in 2020, and there is a serious shortage of production capacity, which brings huge business opportunities to major wafer foundries. Judging from the industrial development situation in 2021, this shortage will be difficult to alleviate in the near future. In this regard, Counterpoint Research believes that in 2021, the mature processes of the top foundries will only be allocated to specific applications. For example, even with strong demand for 8-inch wafers, UMC announced that 8-inch wafer production capacity will only expand by 1%-3% in 2021. SMIC, which accounts for about 10% of the global mature process capacity, is also full of uncertainties in capacity expansion due to the restriction of the US ban. Overall, this wave of capacity shortages is a structural problem that will not ease until all supply chains are restocked in 2022.
The mature process is mainly used to manufacture small and medium-capacity memory chips, analog chips, MCUs, power management (PMIC), analog-digital hybrids, sensors, and radio frequency chips. At the application level, the rapid growth in demand for cloud computing and 5G RF devices has provided a strong impetus for mature processes.
From the demand side, the market application prospects of the characteristic process are broad, and this is the main battlefield of the mature process, which has the basis for attracting more enterprises to become better and stronger in their respective characteristic fields. At present, the three major types of chips, MCU, analog circuits and discrete devices, account for nearly 50% of the overall market share, and their development is more stable, providing a foundation for characteristic process applications. What is more noteworthy is that compared with advanced processes, the penetration rate of characteristic processes in the foundry business model is relatively low. In terms of traditional logic devices, except for Intel, major manufacturers basically adopt “design-foundry-packaging and testing”. However, in the fields of analog devices, MCUs, and discrete devices, IDM’s own production is still the mainstay. This makes more room for the expansion of the foundry business of mature process technology.
In addition, the volatility of the profitability of suppliers of special processes is relatively small. On the one hand, the stability of the demand side makes the manufacturers more predictable in terms of operation and management. On the other hand, due to the relatively high maturity of the process , In terms of equipment expenditure and R&D investment scale, characteristic process manufacturers are relatively small, giving them an advantage in cost control.
Driven by market demand, wafer foundries that master mature processes can rely on capacity adjustment and expansion to increase their market share, especially in East Asia represented by China, where demand grows the fastest. Manufacturers such as SMIC, UMC, World Advanced, TowerJazz, etc., which are based on mature process OEMs, basically focus on discrete devices, driver ICs, PMICs and eNVMs. In addition, although TSMC and Samsung are mainly based on advanced processes, due to their large size and taking into account mature processes at the same time, they also occupy an advantageous position in the mature process market, especially TSMC, whether it is global The overall ranking of wafer foundry, or the list of mature processes, the company is in a leading position.
From the perspective of historical development, TSMC began to transition from low-end wafer manufacturing based on 0.11μm+ process to wafer manufacturing based on more advanced process technology of 40nm-90nm in 2004, and started from the end of 2011. Low-end-based wafer manufacturing transitions to wafer manufacturing based on 28nm and more advanced process technology.
It can be seen from TSMC’s first quarter financial report in 2021 that 40nm/45nm revenue accounted for 7% of total revenue, 65nm accounted for 5%, 90nm accounted for 3%, 0.11μm/0.13μm accounted for 3%, 0.15μm/0.18μm accounted for 3% 6%, 0.25μm and above accounted for 2%. In this way, TSMC’s consolidated revenue from mature processes in the quarter accounted for 26% of total revenue, which is still a considerable figure.
At present, according to the process, the global advanced process and mature process capacity are very short.
In terms of advanced processes (7nm and below), the production capacity is in the ramp-up period, and there will be a substantial increase every year, but the only manufacturers are TSMC and Samsung. continue.
In terms of mature processes, TSMC is also increasing investment. As mentioned above, 10% of the $30 billion in capital expenditures this year, or about $3 billion, will be used to expand the production capacity of mature processes.
Let’s take another look at UMC, another mature process wafer foundry. For more than a year, it has also made a lot of money because the mature process capacity is in short supply. In order to increase capacity supply, the company recently stated that under the condition that customers maintain high demand, this year’s capital expenditure will reach 1.5 billion US dollars, a 50% increase from last year, mainly for 28nm capacity expansion, and most capital expenditures will be used for expansion. Nanke P5 factory.
It can be seen that both TSMC and UMC are increasing their investment in mature process capacity. As mentioned above, TSMC President Wei Zhejia said that mature processes are more likely to be in short supply until 2022, and it is expected that the shortage of mature processes will continue this year and next year. The company’s new capacity will not be released until 2023, when it will be able to provide more capacity to customers and ease the tight production capacity of mature processes.
At the same time, the global advanced manufacturing process is also in a climbing period, and there will be substantial improvements every year. However, I am afraid that by 2023, it will be difficult to meet the market demand. During this time, the shortage of the two is indistinguishable.