TSMC to Spend $100B on Fabs and R&D Over Next Three Years: 2nm, Arizona Fab & Moreby Anton Shilov on April 2, 2021 10:00 AM EST
TSMC this week has announced plans to spend $100 billion on new production facilities as well as R&D over the next three years. The world's largest contract maker of chips says that its fabs are currently working at full load, so to meet demand for its services going forward it will need (much) more capacity. Among TSMC's facilities to go online in the next three to four years are the company's fab in Arizona as well as its first 2nm-capable fab in Taiwan.
"TSMC is entering a period of higher growth as the multiyear megatrends of 5G and HPC are expected to fuel strong demand for our semiconductor technologies in the next several years," a statement by TSMC with the Taiwan Stock Exchange reads. "In addition, the COVID-19 pandemic also accelerates digitalization in every aspect. In order to keep up with demand, TSMC expects to invest $100 billion over the next three years to increase capacity to support the manufacturing and R&D of advanced semiconductor technologies. TSMC is working closely with our customers to address their needs in a sustainable manner."
$100 Billion to Be Spent on Fabs
TSMC's capital expenditures (CapEx) budget last year was $17.2 billion, whereas its R&D budget was $3.72 billion, or approximately 8.2% of its revenue. This year the company intends to increase its CapEx to somewhere in the range of $25 to $28 billion, which would make for a 45% to 62% year-over-year increase in that spending. The company's R&D spending will also rise as its revenue is expected to grow. In total, TSMC plans to invest around $30 billion or more on CapEx and R&D this year. Taken altogether, if the company intends to spend around $100 billion from 2021 through 2023, its expenditures in the next two years will be roughly flat with 2021, something that should please its investors.
TSMC has a number of important fab projects ahead of it.
- First up, the company needs to build and equip its N5-capable fab in Arizona. The facility will cost around $12 billion, will have a capacity of 20,000 wafer starts per month (WSPM), and will come online in 2024. A recent rumor indicates that TSMC might actually increase capacity of the facility and/or equip it for a more advanced fabrication process, which will increase its cost, but TSMC has never confirmed this information.
- Secondly, TSMC will need to equip its N3-capable fab in Tainan, Taiwan, which is projected to start volume production in the second half of 2022.
- TSMC's third capital-expensive project is the company's N2 (2nm) qualified GigaFab in Hsinchu, Taiwan. Furthermore, TSMC is mulling to build another N2-capable fab in Baoshan, Taiwan. Meanwhile, TSMC still has to complete development of its GAAFET-based N2 node.
- Last but not least, TSMC is set to build two more advanced packaging facilities in Taiwan. The company already has four of such facilities, but it believes that demand for chip stacking and advanced packaging will rise in the future and it will need more capacities. Chip packaging factories are not as expensive as semiconductor production facilities, but they still cost quite a lot.
Recently TSMC wrote a letter to its customers where it explained that its fabs have been fully utilized for about a year now and it still cannot meet rising demand for chips. To that end, the company would have to 'suspend wafer price reductions for a year from the start of 2022,' according to a Bloomberg report.
Right now, TSMC is the world's largest contract maker of chips with no rivals that can match its total production capacity. A some of TSMC's rivals, including GlobalFoundries and UMC, have pulled the plug on development of their leading-edge fabrication processes, so the number of companies that can offer leading-edge nodes has decreased. Yet paradoxically, the competition is also escalating in other respects.
Samsung Semiconductor, which has foundry, DRAM, storage, SoC, and a number of other operations, has been increasing its CapEx investments in the recent years. The company spent $93.2 billion on chip production from 2017 to 2020 and is on track spend another ~$28 billion in 2021, according to IC Insights. Samsung Foundry is still several times smaller than TSMC in terms of sales and capacity, but the gap is closing.
In addition to Samsung Foundry, Intel recently introduced its integrated device manufacturer 2.0 (IDM 2.0) plan that includes offering advanced foundry services and essentially compete against TSMC (while also using its services when needed). Intel has already announced plans to invest $20 billion in two new fabs in Arizona and said it would invest more in expansion of chip production in other parts of the USA as well as in Europe and other parts of the world.
To stay ahead of existing and emerging rivals, TSMC needs to keep investing in R&D and expand its production capacities, so a $100 billion investment plan will be instrumental for these purposes.
Post Your CommentPlease log in or sign up to comment.
View All Comments
EthiaW - Sunday, April 4, 2021 - linkThe most urgently needed process these days is actually, you guess…55nm, which can be dated back to the beginning of the century.
Yojimbo - Friday, April 2, 2021 - linkTSMC said that fabs in the US and EU can't be competitive. That was certainly a response to Intel's announced entry into a competition with TSMC and its plan to locate the foundries in the US and the EU. It's predictable TSMC would say something like that since Intel's plan is in direct opposition to TSMC's strategic positioning. It didn't have to do with TSMC's Arizona fab, which is in arrangement with the US and Arizona government in order to provide chipmaking capacity for the DoD.
As far as what TSMC said, we will have to see the US and EU governments' long-term resolve to apply the lessons learned from the covid situation, because it's possibly true that a certain amount of continuing tax incentives are going to have to be maintained in order to make the NA and European foundries competitive with TSMC. The alternative, however, is to have the majority of the world's advanced chipmaking capacity in one basket that is the takeover target of a hostile world power. It's cost efficiency versus robustness, similar to having so much medical equipment and drug precursors being manufactured in China.
Oxford Guy - Saturday, April 3, 2021 - linkHow much in tax ‘incentives’ is TSMC getting from Arizona residents and US residents?
Samus - Sunday, April 4, 2021 - linkNo matter how someone spins it, whatever tax incentives TSMC is getting are going to pay off better than those Wisconsin provided to Foxconn (who totally fucked them.)
zsdersw - Monday, April 5, 2021 - linkOh, believe me, we know all about how Foxconn screwed us in WI. Our former governor was and still is a complete dipshit.
Oxford Guy - Tuesday, April 6, 2021 - linkThe governor is a figurehead. The people of the state and the federal government got behind all that. That also includes the national mainstream media. If there had been real resistance to the project it wouldn't have been green-lighted.
Americans are trained to fixate on the 'few bad apples' so the system can remain broken. One governor is not the cause nor the symptom.
Oxford Guy - Tuesday, April 6, 2021 - linkAlso, the name should have been a clue. Fox + con.
sweetca - Thursday, April 8, 2021 - linkhaha. omg.
DanNeely - Friday, April 2, 2021 - linkI suspect the process for the AZ fab is going to come down to global vs US Govt sales. IF they're primarily chasing a single customer who wants to be able to keep low volume parts in production for long periods of time there's no need to chase the ultimate bleeding edge and drive up costs for everyone. If they're expanding scope to using it to help drain their commercial backlog though launching at as modern a process as possible makes a lot more sense.
DanNeely - Friday, April 2, 2021 - linkShort vs long term support processes is probably also a factor. The DoD needs the latter, but some of TSMC's process variants are only aimed at companies chasing the latest and greatest who are willing and able to keep migrating to something new every year or two and don't have significant lifespans as a result.