TSMC reports early success at first U.S. chip plant
TSMC's chip fab in Arizona is making more usable chips than some of its comparable fabs in Taiwan
Taiwan Semiconductor Manufacturing Company’s first U.S. chip fabrication facility is reportedly ahead of some of the ones back home.
The company’s chip production yields — or the number of functional chips it can produce per manufacturing process — at its Phoenix, Arizona site are about four percentage points higher than those of comparable fabs in Taiwan, Bloomberg reported, citing an unnamed person who was part of a webinar with TSMC’s U.S. division president Rick Cassidy.
It’s a positive sign for the chipmaker as it shows production could possibly offset the multi-billion dollar cost of its stateside chip hub. TSMC has faced delays at planned facilities in Arizona due to a shortage of skilled workers. The two additional factories at the hub are expected to begin production in 2025 and 2028.
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What is TSMC?
TSMC (TWSE: 2330, NYSE: TSM) created the semiconductor Dedicated IC Foundry business model when it was founded in 1987. In 2023, TSMC served 528 customers and manufactured 11,895 products for various applications covering a variety of end markets including high performance computing, smartphones, the Internet of Things (IoT), automotive, and digital consumer electronics. Annual capacity of the manufacturing facilities managed by TSMC and its subsidiaries exceeded 16 million 12-inch equivalent wafers in 2023. These facilities include four 12-inch wafer GIGAFAB® fabs, four 8-inch wafer fabs, and one 6-inch wafer fab – all in Taiwan – as well as one 12-inch wafer fab at a wholly owned subsidiary, TSMC Nanjing Company Limited, and two 8-inch wafer fabs at wholly owned subsidiaries, TSMC Washington in the United States and TSMC China Company Limited.
TSMC is jointly investing in European Semiconductor Manufacturing Company (ESMC) to build a specialty technology fab in Dresden, Germany. ESMC aims to begin construction of the fab in the second half of 2024 with production targeted to begin by the end of 2027. TSMC continues to execute its plan to construct and operate three fabs in Arizona, the United States. The first fab is on track to start production leveraging 4nm technology in the beginning of 2025. The second fab is scheduled to start production in 2028, and the third fab by the end of the decade. The Company is also majority owner of Japan Advanced Semiconductor Manufacturing (JASM) a manufacturing subsidiary in Kumamoto, Japan. JASM’s first fab is scheduled to begin production in 2024, and it is also planning to build a second fab, which is scheduled to begin operation by the end of 2027.
What is a semiconductor foundry?
In simple terms, a semiconductor foundry (also known as a fab) is a factory where silicon wafers are manufactured. The main customers of a semiconductor foundry are chip makers such as: Broadcom, Qualcomm, Intel, AMD and more.
Semiconductor foundries today are at the core of our modern-day society, as almost everything that we use in day-to-day life is electronic and made from chips, which all need to be made produced somewhere. Fabs appeared as a response to the rapidly increasing need for semiconductor devices all around the world, which pushed the electronics industry towards better and larger fabrication plants, where economies of scale truly become worthwhile.
Wafer fabs are built in various places around the world. But as you expect, the big fabs are located across Asia, more specially in Taiwan. This interactive map shows the location of major semiconductor foundries.
There are two types of business models for semiconductor foundry: a pure-play foundry and a non-pure-play foundry.
A non-pure-play foundry is a company that provides foundry services (wafer manufacturing) but in parallel they also produce and sell their own ICs.
Pure-play semiconductor foundries are producing wafers as a service for other companies: fabless semiconductor companies, integrated device manufacturers (IDMs), and sometimes product companies such as Apple that is making its own chips. TSMC is the largest pure-play foundry.
Wafers produced by a semiconductor foundry come in a pre-defined size. The major wafer sizes today are 300mm and 200mm. This paper explains the economy of scale related to wafer size, and the image below shows the various wafer size available in the market today.
C.C. Wei, chief executive of TSMC, said on a call with investors last week that its first U.S. fab “entered engineering wafer production in April with 4-nanometer process technology and the result is highly satisfactory, with a very good yield,” Bloomberg reported. This process is among the most advanced chip manufacturing methods currently in commercial production.
In the beginning, there were no specialized fabs where semiconductor wafers were made. As such, production was limited in size and had big price tags. This is the reason the first foundries came to be, as making more and cheaper electronic components was required to satisfy the growing demand seen since the 1970s and 1980s.
In the 1980s, most semiconductor companies owned and operated their own foundries. As such, there were no semiconductor companies that didn’t own their own fabs since there would be no way for them to manufacture their designs.
The first shift in this space happened when some companies found they had excess capacity in their own fabs because an economically large semiconductor foundry might turn out to be larger than their own needs for their own product lines. Correspondingly, other companies may have the opposite problem: they didn’t build a big enough foundry, or they were late constructing it, and they had more demand than supply.
Semiconductor companies would buy and sell wafers from each other to even out their capacity needs. This became known as the foundry business, analogous to a steel foundry. In a similar way, semiconductor companies with shortages would take their designs to other semiconductor companies with surplus capacity (often even competitors) and have them manufactured for them.
The next step in the evolution of the fab was that in the mid-1980s some companies realized that they didn’t need to own a fab to have chips manufactured. These companies would purchase foundry wafers just like any other semiconductor company. These companies came to be called, for obvious reasons, fabless semiconductor companies.
Semiconductor companies with fabs became known as integrated device manufacturers (IDMs), to distinguish them from the fabless companies. In 1987 the first of another new breed of semiconductor manufacturing companies was created with the founding of Taiwan Semiconductor Manufacturing Company (TSMC). TSMC was created only to do foundry business for other companies who needed to purchase wafers either because they were fabless or because they were capacity limited.
Today, there are a few IDMs, such as Intel, who build almost all of their own chips in their own fabs; there are foundries, such as TSMC and GlobalFoundries, who build none of their own chips, they just build wafers for other companies; and then there are fabless semiconductor companies, such as Xilinx and Qualcomm along with their fab-lite cousins, like Texas Instruments, who do their own design, sell their own products, but use foundries for all or part of their manufacturing.