TSMC on Thursday announced its financial results for the second quarter of 2024, reporting a 40.1% year-on-year revenue increase. The Taiwan-based chip foundry also stated that it has raised its full-year revenue and capital expenditure targets for 2024. The firm’s earnings call was also remarkable for TSMC CEO C.C. Wei introducing the new concept of “Wafer Foundry 2.0” for the first time during his comments to investors.

Why it matters: TSMC’s introduction of Wafer Foundry 2.0 signifies a strategic expansion beyond traditional wafer manufacturing. The move aims to capitalize on emerging market opportunities and meet the growing complexity of semiconductor production.

Details: TSMC said the idea of Wafer Foundry 2.0 is intended to better leverage its advanced packaging capabilities for market expansion by encompassing a wider range of activities compared to the traditional wafer manufacturing industry.

• As chip manufacturing becomes increasingly complex, wafer foundries have evolved beyond simple wafer manufacturing services. Wafer Foundry 2.0 was unveiled during TSMC’s second quarter earnings call, during which Wei redefined the foundry industry to include packaging, testing, mask-making, and IDM (Integrated Device Manufacturer) operations.
• Wei also noted that demand for TSMC’s 3nm and 5nm process technologies remains strong. As the company enters the third quarter, the demand for advanced processes driven by smartphones and AI opportunities has slightly raised its full-year revenue forecast for 2024, increasing the expected growth range from 21%-26% to 24%-26% year-on-year, he said.
• TSMC has also raised its 2024 capital expenditure budget from $28 billion-$32 billion to $30 billion-$32 billion. Of this, 70% to 80% will be allocated to advanced process technologies, 10% to 20% to special process technologies, and 10% to advanced packaging, testing, and mask-making, the company said.
• In the second quarter, TSMC reported revenue of NT$673.51 billion ($20.56 billion), a 40.1% increase year-on-year and a 13.6% rise quarter-on-quarter. Net profit was NT$247.85 billion ($7.57 billion), up 36.3% from the previous year and 9.9% from the previous quarter.
• In terms of revenue distribution by process technology, TSMC’s revenue from advanced processes of 7nm and below reached 67% in the second quarter. The firm’s 3nm process revenue accounted for 15% of this total, largely due to the launch of Apple’s A17 Pro series processors last year, as well as its M4 series processors and the upcoming A18 series processors this year.
• By end-use application, the revenue breakdown is as follows: high-performance computing accounted for 52%, smartphones for 33%, IoT for 6%, automotive electronics for 5%, consumer electronics for 2%, and others for 2%.

Context: Apple has secured the first batch of TSMC’s 2nm production capacity, expected to start trial production soon. The new chips, debuting in the iPhone 17 series, may boost performance by up to 15% and cut power consumption by 30% compared with the 3nm process.

The demand for advanced process chips has surged, as AI servers and high-performance computing (HPC) applications transition to AI phones. Taiwanese media outlet Economic Daily News reported on Tuesday that Apple, Qualcomm, Nvidia, and AMD have almost booked TSMC’s 3nm process to full capacity, leading to a queue of customers extending to 2026.

Why it matters: The rapid evolution of AI technology across multiple sectors has driven a surge in demand for advanced process chips. Increasing orders from major clients is expected to further push TSMC to innovate and develop advanced manufacturing processes. 

Details: Currently, TSMC’s 3nm lineup includes N3, N3E, N3P, N3X, and N3A, according to the Economic Daily News report.

• N3E, which entered mass production in the fourth quarter of last year, primarily serves AI accelerators, high-end smartphones, and data centers. N3P is expected to enter mass production in the latter half of this year and will become the preferred chip process for mainstream applications including mobile devices, consumer electronic products, base stations, and networking by 2026. N3X and N3A are designed for customized demands such as high-performance computing and automotive clients.
• The latest high-end chips this year are all adopting the 3nm process, according to Chinese media outlet Icsmart. Apple will introduce the M4 series processors this year and is set to release the next-gen A18 series processors for its new iPhone16 series this September. Later this year, Qualcomm will launch its flagship mobile platform Snapdragon 8 Gen 4, while Nvidia is set to unveil the RTX 50 series graphics cards. AMD will release the fifth-gen EPYC Turin processors in the second half of the year, with plans to launch the MI350 series next year.
• TSMC, as the exclusive supplier of Apple’s A-series processors for the new iPhones, will see a significant increase in demand for related 3nm orders. Apple’s iPhone 16 series this year is expected to increase sales volume by 5% year-over-year to 92-95 million units, the Economic Daily News report forecasted.
• To ensure stable supply over the next two years, TSMC’s strategy is to convert some of its 5nm equipment to support 3nm production. Industry sources indicate that TSMC is likely to up its production of 3nm wafers to between 120,000 and 180,000 a month.

Context:The total production value of the top ten semiconductor foundries in the first quarter reached $29.2 billion, a decrease of 4.3% compared to the previous quarter, according to market research firm TrendForce.

• In the first quarter, TSMC led with a revenue of $18.85 billion and a market share of 61.7%, followed by Samsung with $3.36 billion and an 11% market share. Shanghai-based chip foundry SMIC took third place with $1.75 billion in revenue and a 5.7% market share.

The US Department of Commerce and the semiconductor foundry TSMC jointly announced on Monday that they have reached a preliminary agreement to provide the Taiwanese manufacturer with up to $6.6 billion in subsidies under the US CHIPS Act to support the construction of advanced semiconductor manufacturing facilities in Phoenix, Arizona. As part of the agreement, TSMC will also construct its third fab in Phoenix, bringing its total investment in the US to over $65 billion.

Why it matters: The agreement supports TSMC’s expansion in the US while also demonstrating a strategic partnership to strengthen advanced semiconductor manufacturing in the country as it concurrently looks to limit China’s development in the field.

Details: Following the subsidy announcement, TSMC revealed plans for a third fab in Arizona to introduce 2nm process chip technology or more advanced processes, with production beginning by the end of the decade.

• TSMC Arizona’s first fab is set to gear up for production of 4nm chips by the first half of 2025, while the second fab will produce both 2nm and 3nm chips in 2028.
• TSMC Arizona will establish a cutting-edge cluster, generating 6,000 direct manufacturing roles, over 20,000 construction jobs, and tens of thousands indirect employment opportunities in the next decade, according to the US Department of Commerce.
• With this new funding, TSMC’s total investment in the US has increased from $40 billion to $65 billion. This investment represents the largest foreign direct investment in Arizona history, and the largest foreign direct investment in a greenfield project in US history, TSMC said in the statement.
• “Our US operations allow us to better support our US customers, which include several of the world’s leading technology companies. Our US operations will also expand our capability to trailblaze future advancements in semiconductor technology,” said TSMC Chairman Dr. Mark Liu. 
• TSMC is the fifth company to receive public subsidies from the US government since the enactment of the CHIPS Act in 2022, and the only foreign entity to date, according to Chinese media outlet Jiemian. The other four companies are BAE Systems, Micron, Qualcomm, and Intel, which received subsidies of $35 million, $162 million, $1.5 billion, and $8.5 billion respectively.
• TSMC holds over 60% of the global orders for advanced process chip manufacturing, with nearly 70% of its clients coming from the US, the same Jiemian report said. According to TSMC’s previous financial conference calls, the focus of the Arizona factory is to serve clients in the US.

Context: The current construction of two fabs by TSMC in Phoenix is experiencing delays due to issues such as a shortage of skilled workers, as revealed by Chinese media outlet Icsmart.

• Fab 1’s production of 4nm technology has been delayed from 2024 to 2025, while Fab 2’s 3nm production, initially planned for 2026, is now scheduled for 2028. The two fabs are intended to produce over 600,000 wafers per year, potentially generating a market value exceeding $40 billion annually.

Semiconductor giant TSMC has revealed that subsidies obtained from the Japanese and Chinese governments reached NT$47.545 billion ($1.51 billion) in 2023, marking a 5.74-fold increase year-on-year, according to Taiwanese media outlet Economic Daily News. With its ongoing expansion of overseas facilities, TSMC anticipates further subsidies from Japan this year, along with potential new subsidies from the US and Germany.

Why it matters: As nations compete to enhance their domestic semiconductor manufacturing sectors via subsidies, TSMC has become a key target for government investment in local facilities.

Details: In 2023, TSMC’s Japanese subsidiary JASM and its mainland Chinese counterpart in Nanjing secured subsidies from the respective governments of Japan and China, which primarily for real estate, building factories, purchasing equipment, and funding production facility costs.

• In 2022, subsidies from the Japanese and Chinese governments reached around NT$7.051 billion ($220 million), soaring 574% to NT$47.545 billion ($1.51 billion) in 2023. Although TSMC did not specify the exact breakdown of the subsidies, previous data indicates that the Japanese government decided to grant TSMC’s Kumamoto Fab 1 JPY 476 billion ($3.2 billion) in phased subsidies, as reported by Chinese media outlet Icsmart. 
• TSMC’s 2023 subsidies from mainland China primarily originated from the expansion project at its Nanjing plant, the Icsmart report added. In April 2021, TSMC announced a plan to invest $2.88 billion in expanding its 28nm process manufacturing at the Nanjing facility, to meet a rising demand for automotive chips and the global chip shortage.
• TSMC is currently investing $40 billion to construct a semiconductor fab in Arizona, with plans to manufacture 4nm and 3nm chips. A recent Bloomberg report suggests that Intel may receive around $10 billion in subsidies under the US’s CHIPS Act. According to analysis by Icsmart, using Intel’s investment and estimated subsidy amount as a reference point, TSMC could potentially receive nearly $10 billion in subsidies as well.
• TSMC is also collaborating with Infineon, NXP Semiconductors, and Bosch to invest €10 billion in constructing a semiconductor factory in Dresden, a city in eastern Germany. The German government is also expected to give about €5 billion in subsidies, according to news agency Focus Taiwan.

Context：TSMC’s Kumamoto Fab 1 started operations on Feb. 24 and is aiming to mass-produce 28/16/12nm chips in the fourth quarter of 2024. By the end of this year, TSMC plans to establish a second fab in Kumamoto, targeting production by late 2027, with a focus on 7/6nm processes.

• After the opening ceremony of Kumamoto Fab 1, Japan’s Minister of Economy, Trade and Industry, Ken Saito, announced that the government will subsidize TSMC with JPY 732 billion ($4.94 billion) for the construction of Kumamoto Fab 2 on the site.

TSMC’s first Japanese plant began operations in the southern prefecture of Kumamoto on Feb. 24, as the company confirmed plans for a second factory in the country within the year. TSMC’s 92-year-old founder, Morris Chang, attended the opening ceremony in Kumamoto, and Japan’s Prime Minister Fumio Kishida sent a congratulatory video message.

Why it matters: TSMC’s decision to build factories in Japan was hastened by incentives provided by the Japanese government, aiming to accelerate the growth of the local semiconductor industry by fostering collaborations with international foundries. Additionally, TSMC was enticed by Japan’s abundance of water resources and concentration of related tech companies that the firm needs to thrive in the sector, as suggested by industry analysis.

Details: TSMC founder Morris Chang, Chairman Mark Liu, CEO C.C. Wei, and other senior executives attended the opening ceremony of its majority-owned subsidiary JASM (Japan Advanced Semiconductor Manufacturing), according to a company announcement.

• Japan’s Prime Minister Kishida said in his video message broadcast at the event that the Japanese government has chosen to support the expansion of JASM in the context of the Domestic Investment Promotion Package announced in December 2023. Other distinguished attendees included Japanese Minister of Economy, Trade and Industry Ken Saito, and Chairman of the Liberal Democratic Party’s group on semiconductor strategy Akira Amari.
• Representatives from key partners such as Sony CEO Kenichiro Yoshida, Denso President Shinnosuke Hayashi, Toyota Chairman Akio Toyoda, and Kajima President Hiromasa Amano also leant their support to the chip-maker’s Japanese subsidiary by attending the factory opening.
• In his speech, TSMC founder Morris Chang recalled being invited to establish the chip factory in Japan back in 2019. Five years later, he said, the factory was a reality, with JASM expected to enhance the resilience of the chip supply chain and contribute to the revitalization of the local semiconductor industry, he said.
• The first plant, backed by a JPY 476 billion ($3.16 billion) subsidy from the Japanese government, will produce chips using 28/16/12-nanometer processes, while the second plant will specialize in 7/6-nanometer processes, according to Taiwanese media outlet Economic Daily News. JASM is expected to start construction of the second plant by the end of this year and be making chips there from the end of 2027.
• TSMC claims that the Japanese government’s investment in JASM will surpass $20 billion, and the establishment of the two fabs will provide at least 3,400 jobs.

Context: Sony, Denso, and Toyota also invested in JASM. Building of the first plant in Kumamoto began in April 2022, as reported by the media outlet Jiwei. 

• TSMC holds around a 70% stake in JASM, with Sony, Denso and Toyota as secondary investors. The plant expects to ramp up to a planned monthly production capacity of 55,000 12-inch chips.

Apple is set to become TSMC’s largest customer for the N3E process, with plans to integrate the upgraded 3nm chip technology into its forthcoming iPhone 16 models next year, as revealed by DigiTimes on October 13. The report also mentions that the sales of 3nm chips is expected to account for 4% to 6% of TSMC’s 2023 revenue, amounting to a total value of $3.4 billion.

Why it matters: The development of advanced chips incurs significant costs, particularly in initial stages where 3nm process technology is still maturing and yield rates are low. While most companies cannot afford the high manufacturing costs of TSMC’s 3nm chips, Apple stands out with the capability to drive TSMC’s advanced chip technology forward.

Details: TSMC aims to promote mass production of the second generation of 3nm chips (N3E process) in 2024, with the iPhone 16 series slated to be the first smartphone using N3E technology, according to the exclusive DigiTimes report.

• TSMC’s second generation 3nm node, N3E, offers improved affordability and higher yield rate compared to its predecessor, N3, featured in the A17 Pro chip of Apple’s iPhone 15 Pro models launched in September 2023. The N3E process is specifically designed to enhance chip performance and reduce power consumption in devices.
• TSMC has initiated large-scale production of N3E, with plans to replace the N3 entirely with the upgraded version by 2024, according to insider information from DigiTimes. All major chip manufacturers, except Samsung, are set to adopt the second generation N3E. TSMC has secured orders from various clients, with Apple being the largest among them.
• TSMC is anticipated to gain 4% to 6% of its total revenues in 2023 from 3nm manufacturing, primarily due to substantial orders from Apple for N3 chips powering the iPhone 15 Pro models. Apple’s orders alone are projected to account for up to $3.4 billion in sales for TSMC this year.
• Jeff Pu, an analyst covering companies in Apple’s supply chain, claims that all four iPhone 16 models will feature A18-branded chips. The A17 Pro processor in the iPhone 15 Pro models is a transitional design, and the upcoming iPhone 16 models will all incorporate A18 chips, leveraging TSMC’s N3E technology, he said.

Contexts: In July, TSMC faced efficiency challenges with its new 3nm manufacturing process, achieving a yield rate of only 55%, well below the expected standard. Due to this low yield, Apple opted to pay for qualified wafer batches instead of entering into a fixed rate agreement with TSMC.

• TSMC is expected to further enhance the transistor density of the N3 family with N3P following N3E, according to TSMC. N3P, an advanced process node, will empower chip designers to enhance performance by 5% without increasing leakage, or alternatively, achieve a 5% to 10% reduction in power consumption while maintaining the same speed.

TSMC is urgently seeking equipment suppliers from whom it can buy CoWoS (Chip on Wafer on Substrate) machines, as Nvidia, AMD, and Amazon expand orders for AI chips, local media outlet Economic Daily News exclusively reported on Monday. TSMC has increased its equipment orders for CoWoS by 30% to meet growing AI-fueled demand, the report claimed.

Why it matters: The AI boom has reshaped the semiconductor landscape, positioning chip-making companies as critical enablers of the tech revolution while presenting complex challenges related to supply chain resilience and technological advancement. 

Details: CoWoS is a high-density advanced packaging technology developed by TSMC for high-performance chips. The current shortage of CoWoS packaging capacity has become the main bottleneck in the production chain for AI chip orders.

• Nvidia is TSMC’s largest customer of CoWoS advanced packaging, accounting for 60% of the production capacity, according to the report. Recently, in response to the strong demand for AI computing, Nvidia has increased its orders from TSMC, while AMD, Amazon, and Broadcom have also been placing urgent orders.
• Due to its shortage of CoWoS machines, TSMC has sought the assistance of local equipment suppliers including Scientech Corporation, AllRing-Tech, Grand Process Technology, E&R Engineering Corporation, and Group Up Industrial. TSMC has increased its original equipment orders by up to 30%, with delivery expected in the first half of 2024. Mass production will commence in the second half of 2024.
• Currently, TSMC’s monthly capacity of CoWoS advanced packaging is approximately 12,000 units, sources familiar with the matter told Economic Daily News. To accommodate the proposed production expansion, the monthly capacity of CoWoS will be increased to between 25,000 and 30,000 units.
• Major customers such as Nvidia and AMD have increased their orders of TSMC wafers in the third quarter, boosting TSMC’s 7nm and 5nm advanced process capacity utilization.
• Pressure on CoWoS production capacity is expected to ease after next summer, TSMC’s president C. C. Wei stated during a recent earnings call. The Economic Daily News report revealed that TSMC has been expanding its facilities at plants including Zhuke, Zhongke, Nanke, and Longtan, so as to increase CoWoS production capacity.

Context: On September 24, Chinese media outlet IThome reported that Qualcomm’s next generation Snapdragon 8 Gen 4 may have been manufactured using TSMC’s N3E process technology, as indicated by leaked documents from Qualcomm.

• On September 8, TSMC announced net revenue for August 2023 of approximately NT$188.69 billion ($5.87 billion), representing an increase of 6.2% from the previous month.

Semiconductor giant Qualcomm is set to work with both TSMC and Samsung simultaneously to create a new 3nm version of its Snapdragon 8 Gen 4 chip, Taiwanese media outlet Commercial Times reported on Aug 17. It seems likely that Qualcomm will only be able to secure around 15% of TSMC’s 3nm production capacity for its chips, with Apple’s upcoming iPhone 15 Pro series expected to dominate the Taiwanese firm’s output. Samsung’s 3nm process yield has significantly improved in recent months, allowing it to catch up with sector leader TSMC.

Why it matters: Adopting 3nm technology will allow Android devices using Qualcomm’s Snapdragon 8 Gen 4 to narrow the performance gap with the forthcoming iPhone 15 Pro series and its A17 Bionic chip. Qualcomm’s Snapdragon system on chip (SoC) lineup currently powers the majority of Android smartphones on the market, with the Snapdragon 8 Gen 4 processor scheduled to launch in 2024. 

Details: Qualcomm looks set to adopt a dual-source approach by partnering with both TSMC and Samsung for next year’s Snapdragon 8 Gen 4. 

• TSMC has indicated that demand for its 3nm process remains strong. The process will support HPC (High-Performance Computing) and smartphones in the second half of this year, accounting for an estimated 4% to 6% of TSMC’s wafer revenue in 2023. The firm has already received customized orders for its N3E process, its latest 3nm offering, which has successfully passed verification and is expected to start mass production in the fourth quarter.
• To meet the demand for Apple’s A17 Bionic chip, TSMC aims to reach a monthly production capacity of 100,000 units for the 3nm process by the end of the year. Compared to the 5nm process, the 3nm process is set to deliver an 18% increase in speed, while reducing power consumption by up to 30% under the same performance conditions, according to TSMC.
• Qualcomm’s Snapdragon 8 Gen 3 and MediaTek’s Dimensity 9300 are expected to be released in October using TSMC’s N4P (4nm) process, according to the report from Commercial Times. Both companies are projected to adopt the N3E (3nm) process in 2024. 
• According to Wccftech, a leak of the Qualcomm Snapdragon 8 Gen 4’s specs shows that it will feature custom Phoenix cores and TSMC’s N3E technology. The report mentioned that Qualcomm will apply its self-developed Nuvia CPU architecture to the new chipset.
• Qualcomm opted for the 4nm process for this year’s Snapdragon 8 Gen 3 due to the high cost of TSMC’s 3nm process. Currently, Apple dominates the allocation of these cutting-edge 3nm wafers, according to media outlet Wccftech. 
• In July, Korean media outlet KMIB claimed that Samsung now boasts a 60% yield rate for its 3nm process, slightly higher than TSMC’s 55%. TSMC’s low yield rate has reportedly led Apple to commit to only paying for qualified wafer batches, instead of establishing a standard rate with TSMC.

Context: In the first quarter of 2023, the top three brands in terms of global smartphone chipset shipments were Mediatek with a 32% market share, Qualcomm with 28%, and Apple with 26%, according to market research firm Counterpoint.

TSMC is struggling with the efficiency of its new 3nm manufacturing yield, with the semiconductor giant currently hitting a yield rate of just 55%, far below the standard expected, according to a July 13 report in technology media outlet wccftech. The low yield rate has reportedly led Apple to only pay for qualified wafer batches instead of establishing a standard rate with TSMC. Apple occupies 90% of TSMC’s 3nm process production capacity for its A17 Bionic and M3 chips. 

Why it matters: The iPhone 15 Pro and iPhone 15 Pro Max are widely expected to become the first smartphones powered by TSMC’s 3nm process chipset. However, TSMC’s yield rate of 55% may cause it to lose customers to competitors such as Samsung, which has reported a 60% to 70% yield rate with its 3nm process.

Details: Brett Simpson, senior analyst at Arete Research, claimed that TSMC and Apple have reached a special deal, through which Apple will only pay for functional circuits, rather than paying standard pricing for the entire wafer. If the 3nm yield rate improves to a regular 70%, the deal may be adjusted so that Apple pays up to $17,000 per wafer in the second half of 2024.

• The monthly production of TSMC’s 3nm wafers is expected to reach 100,000 pieces by the end of 2023 to meet the demand for the iPhone 15 series smartphones. 
• In 2024, Apple may switch to TSMC’s N3E process technology instead of N3B process technology, due to the lower production cost and higher yield rate of the N3E, according to the wccftech report. However, the N3E process may reduce the processor performance of the A17 Bionic and M3, and a final decision has therefore not yet been made. N3B is the original 3nm node created in partnership with Apple, while N3E is the simpler version produced for the majority of TSMC’s customers.
• The iPhone 15 series will begin mass production in August, with the iPhone 15 Pro and iPhone 15 Pro Max using the A17 Bionic processor. As Apple’s first chip manufactured with a 3nm process, the A17 Bionic is expected to bring major performance and efficiency improvements over its predecessors the A14, A15, and A16 chips, which used a 5nm process.
• Apple plans to release a 13-inch MacBook Pro with its M3 chip, as well as 14-inch and 16-inch models of the MacBook Pro with M3 Pro and M3 Max chips, according to a report from Bloomberg.

Context: In May, Samsung said in its first quarterly earnings report that its 3nm chip process had an impressive 60% to 70% yield rate. Samsung previously struggled with its 4nm process, which caused Qualcomm to partner with TSMC for the Snapdragon 8 Plus Gen 1 and Snapdragon 8 Gen 2 over the Korean company.

• TSMC’s 4nm process yield rate was reported to be around 70% to 80%, while Samsung only achieved approximately 50%, according to Digitimes. As Samsung gradually improves its 3nm and 4nm process yield rates, the company may regain former customers it lost to TSMC.

Chip giant TSMC plans to construct a second chip plant in the Kumamoto Prefecture of Japan to manufacture 12nm chips by the end of 2026, Japanese media outlet Nikkan Kogyo Shimbun reported on Tuesday. TSMC will reportedly invest 1 trillion yen ($7.1 billion) for the second plant, which is expected to start construction in April 2024.

Why it matters: In recent years, the Japanese government has gradually realized the limitations of its own chip industry, especially with the world transitioning to EV and the automobile industry’s increasing demand for advanced chips. TSMC’s further expansion in Japan may make it eligible to receive huge subsidies from the local government, and improve the company’s production capacity by utilizing local water and power resources. 

Details: In June, TSMC’s chairman Mark Liu revealed that the company was evaluating the possibility of another plant aimed at producing mature-process chips in Kumamoto Prefecture, near the company’s first facility.

• On June 9, Yasutoshi Nishimura, the Minister of Economy, Trade and Industry of Japan, responded to the news by saying that the Japanese government would consider providing financial aid to a potential second TSMC plant in Japan.
• In June, Sony CEO Terushi Shimizu told a round-table conference that TSMC’s first plant in Japan had been unable to fulfill an order for his firm, after receiving a large order from electric vehicle makers such as Honda. He also said that Sony has not yet decided to invest in the second plant.
• On June 30, at a press conference held in Yokohama Japan, Kevin Zhang, TSMC’s Senior Vice President, said the company did not rule out the possibility of manufacturing advanced process chips in Japan in the future.
• Last year, TSMC and Sony invested approximately $7 billion to build the first semiconductor factory in Kumamoto Prefecture, while the Japanese government decided to provide 476 billion yen ($3.38 billion) in subsidies.
• TSMC has already started the construction of its first plant in Japan and is targeting local production in 2024, according to the Nikkan Kogyo Shimbun report. Japan Advanced Semiconductor Manufacturing, a joint venture with TSMC, is in charge of Japan’s business operations, with Sony, Honda, and Denso all investing. According to TSMC, the first factory will produce 55,000 wafers a month by the end of 2024, using 12nm, 16nm, 22nm, and 28nm process technologies.

Context: Last December, TSMC announced it would increase its planned investment of $12 billion to $40 billion for two new factories in Arizona, US. For its US factories, the company plans to start producing 4nm chips in 2024 and 3nm chips in 2026, respectively.

• The US passed the CHIPS and Science Act last August to offer around $52 billion in incentives for US-based chip manufacturing.

Apple’s orders for the iPhone 15 series’ 3nm chips may boost TMSC’s revenue in the third quarter of 2023 by 11%, with a company representative estimating that the firm’s second quarter revenue will reach approximately $17 billion, according to Economic Daily News. Apple is the largest customer for TSMC and the consumer tech giant’s chip orders accounted for 23% of TSMC’s revenue in 2022, according to its yearly financial report. This proportion may be even higher this year.

Why it matters: With Apple’s new iPhone 15 series set to be released in September, industry analysts are predicting that iPhone 15 series shipments may reach 85 million units, which is 9% higher than the 78 million units of the iPhone 14 series shipped last year. This marks a growth opportunity for TSMC, as the company is the exclusive manufacturer of Apple’s 3nm advanced processor.

Details: Apple is widely expected to switch to a 3nm process for its A17 Bionic chip in this year’s flagship iPhone 15 Pro and iPhone 15 Pro Max. TSMC’s 3nm process is expected to lead to a combination of performance and efficiency improvements.

• In order to meet the mass production requirements of the new iPhone 15 series, Foxconn has been stepping up its recruitment in Zhengzhou, the central Chinese city home to its largest facility. Currently, the number of recruits per day has reached around 1,000, according to Economic Daily News. The report suggested that the peak production period will run from July to September, by which time recruitment may reach 10,000 new workers per day.
• Compared to the current 4nm process used in Apple’s iPhone 14 Pro chips, the ‌3nm‌ process brings both speed and efficiency improvements. The ‌3nm‌ technology is predicted to achieve a 35% power efficiency improvement and 15% faster performance compared to 4nm. Additionally, Apple’s M3 chip for new Macs and iPads is expected to use the ‌3nm‌ process, according to MacRumors. 
• Apple has booked nearly 90% of chip supplier TSMC’s first-generation 3nm process capacity this year for future iPhones, Macs, and iPads, according to industry sources cited by DigiTimes.
• Due to the strong demand for the 3nm process, TSMC’s 3nm production capacity is in short supply, although the company has not announced many details about its monthly production capacity. The industry estimates that TSMC’s 3nm production capacity needs to increase to 100,000 pieces per month if they want to fully meet customer demand this year.

Context: On June 23, the US Department of Commerce announced the expansion of subsidies for the Chip Act, according to the Wall Street Journal. Originally, the subsidies were only for companies building new fabs in the US, but they now include support for supply chain manufacturers such as those working in chemicals, materials, and semiconductor equipment.

• By the end of 2022, TSMC’s new production base in the US had attracted dozens of chip-related suppliers to follow suit by building factories in the area, including Dutch ASML, US Applied Materials, US Lam Research, Tokyo Electron, and Sunlit Fluto & Chemical.

Senior executives from TSMC will gather in Shanghai this week for the company’s annual tech forum TSMC Technology Symposium on June 21, where the chip giant will share details of its forthcoming products and technologies, according to media outlet icsmart. The visiting group includes TSMC CEO C.C. Wei, vice president of business development Kevin Zhang, and deputy general manager of technology research Cliff Hou. As part of their trip, the trio plans to visit Chinese chip design companies such as Alibaba and Biren Technology, the report said.

Why it matters: This will be the first time that TSMC executives have been able to visit the company’s customers in mainland China in person since 2020. The company’s mainland China events were all held online during the last three years due to the Covid-19 pandemic.

Details: A number of significant customers for the chip maker are set to attend the TSMC Technology Symposium in Shanghai, which comes one month after similar events in Taiwan and Europe and a week before another symposium in Japan.

• TSMC representatives will visit Alibaba and Biren. Alibaba has a chip unit called T-Head, which specializes in designing chips for cloud computing and various other applications.  Biren is a fabless semiconductor design company founded in 2019 by Lingjie Xu and other former NVIDIA and Alibaba employees.
• Currently, the Chinese mainland market accounts for 10% to 15% of TSMC’s overall revenue, only second to its North American business, according to the firm’s first-quarter financial report. 
• In 2016, TSMC established a factory in Nanjing, the capital of eastern China’s Jiangsu province. The facility manages a 12-inch wafer fab and a design service center. The firm also operates a factory in Shanghai, which was established in 2002 and includes an 8-inch wafer fab.
• On Wednesday, in addition to providing a showcase of TSMC’s advanced chip process technology, the forum is expected to focus on how to reduce cost and increase efficiency, with prices for everything from building factories to purchasing equipment and even neon gas rising due to global inflation, according to media outlet Vocus.
• On April 26, TSMC held its 2023 North America Technology Symposium, introducing its latest technology developments including progress on 2nm technology and new products in its industry-leading 3nm technology range.

Context: Last October, TSMC secured a one-year license to continue ordering US chipmaking equipment for its expansion in China, allowing it to avoid the US’s export controls to China. Recently, senior officials from the US have reportedly indicated that the government may extend the one-year exemption for TSMC, which may enable the company to pursue its expansion plan in China.

• TSMC started pre-production operations on its 2nm process in June, and the company plans to start mass production of the advanced 2nm chip in 2025.
• TSMC claims that compared to the 3nm chip technology (N3 series), the speed of its 2nm chips will increase by 15% using the same power consumption and that power consumption will be reduced by 30% when used at the same speed.
• At a shareholders’ meeting in June, President of TSMC Mark Liu said that TSMC holds a key role in calming geopolitical tensions between China and the US.

On Monday, leading chip manufacturer TSMC started pre-production operations on its 2nm process, according to Taiwan-based media outlet Economic Daily News. Sources revealed that the chip maker will use an advanced AI system to improve energy efficiency and accelerate efficiency. Apple and Nvidia are expected to be among the first batch of customers for the Taiwan-headquartered company’s 2nm production, putting significant pressure on its competitors such as Samsung.

TSMC did not comment on specific details in response to the report, but stated that the development of 2nm technology is progressing well and aims to hit mass production by 2025.

Why it matters: TSMC’s 2nm plan could bring it into head on competition with Samsung. Samsung, which beat TSMC to be the first chip manufacturer to widely employ 3nm processes, also announced last year that it expects to have 2nm chips in mass production by 2025.

Details: According to the report, TSMC is estimated to begin test producing hundreds of 2nm chips this year, laying the foundation for mass production in 2025. The 2nm production base will be established at TSMC’s Fab 20 at Hsinchu Science Park, with subsequent expansion to Taichung Science Park, encompassing a total of six phases of engineering. 

• TSMC has already begun to dispatch engineers to the Hsinchu Science and Industrial Park for the 2nm process, building a research and development team of over 1,000 employees, according to Economic Daily News. 
• In the initial stages, TSMC will set up a small trial-production line at its Hsinchu headquarters, with a target of taping out around 1,000 2nm chip pieces by the end of this year, the report said. 
• On April 26, TSMC showcased its latest technology developments at its 2023 North America Technology Symposium, including in the fields of 3nm and 2nm technology. 
• The 2nm process will be the first process node at TSMC to employ gate-all-around (GAA) transistors, nanosheet transistors which TSMC says will boost performance, energy efficiency, and transistor densities. The company claims this will offer an improvement in speed of up to 15% over 3nm at the same power, and up to 30% power reduction at the same speed.
• Nvidia’s CEO Jensen Huang previously said at GTC 2023 that TSMC will bring the AI system that Nvidia and TSMC and other partners worked on into 2nm trial production this June. The system promises a computation time that is 1/40th of its predecessor.

Context: Samsung expects to have 2nm chips in mass production by 2025 and plans to deliver mass production using a 1.4nm process by 2027.

• TSMC reported record revenue for 2022 of NT$2.26 trillion ($74.25 billion), a rise of 42.6% from 2021. It was the first time the world’s largest contract chip manufacturer reached NT$2 trillion in revenue for a year.
• The Apple iPhone 15 Pro will be powered by the A17 Bionic chip based on TSMC’s 3nm technology, according to product review site Tom’s Guide. The chip is also expected to debut in this year’s upcoming MacBook models.

Chip manufacturer TSMC sees a declining utilization in 6nm and 7nm processes as people buy fewer smartphones and PCs amid a global economic slowdown. It expects to cut utilization of certain chips in the next three quarters.

Why it matters: The market downturn will not see a recovery in the next six to nine months due to the “gloomy economic outlook,” according to market analysis firm Canalys. Chip contractors like TSMC, which had a high capacity utilization rate, now face vacancies in certain tech nodes.

• Such issues could worsen the situation for TSMC, which is already facing the loss of orders from mainland China due to the latest US chip export controls. For example, Biren’s BR100 GPU has adopted TSMC’s 7nm process, but the chipmaker has put its work with the firm on hold due to the ban.
• In more positive news, the development could help to relieve chip shortages in other fields such as gaming consoles. Steam Deck, Xbox Series X, and Playstation 5 all use AMD customized processors built with TSMC’s 7nm tech.

Details: TSMC released its financial results for the third quarter of this year on Oct. 13 and gave conservative guidance of 0.4% quarterly revenue growth for the next quarter. The company also said its 6nm and 7nm production could remain affected until next year.

• C. C. Wei, TSMC’s CEO of the firm, stated that the firm’s 7nm production capacity utilization was affected as a result of the weak demands of personal computers and smartphones and semiconductor inventory adjustments, which will be relieved in the second half of 2023.
• 6nm and 7nm nodes comprised 26% of TSMC’s revenues in the third quarter of 2022, according to a report from Counterpoint. Smartphones and high-performance computing (HPC) devices, like CPU and GPU for PCs and servers, made up 32% and 38% of TSMC’s total wafer shipment volume in 2022, respectively.
• The report also pointed out that “the global foundry industry’s utilization rate has reached its peak level in mid-2022 [and] the downtick will bring down business in all aspects in the next few quarters before any signs of improvement emerge in inventory levels across the semiconductor supply chain.” 
• TSMC’s utilization rate of 6nm and 7nm could drop to 80% to 90% in the next three quarters, and it would be unlikely to recover until clients such as Intel deliver more orders.
• Counterpoint’s report does however agree with TSMC that there could be “positive drivers” via new products such as Wi-Fi, radio-frequency (RF), and solid-state drive controller chips migrating onto 6nm or 7nm when the inventory cycle ends in 2023.

Context: TSMC is a top chipmaker worldwide, dominating 56% of the market by revenue in the second quarter of this year, according to Counterpoint. The chipmaker generated a revenue of $20.23 billion for the third quarter this year, a yearly growth rate of 35.9%.

• 7nm and 6nm are important tech nodes, contributing 17% of the global chip foundry revenues in the second quarter of 2022.

Chip manufacturer TSMC will use chip design software from US firms to produce 2nm chips and expect to reach volume production of 2nm chips in 2025. The chipmaker increased its revenue growth target from between 24% and 29% to between 34% and 36% this year due to high utilization of production capacity.

Why it matters: TSMC and Samsung have been racing to reach volume production of 3nm chips first. On Aug. 30, TSMC claimed the 3nm chip will be put into volume production this month, despite encountering difficulties. As a result, the 2nm node is becoming the next competitive point for top chip makers.

Details: TSMC said they would achieve volume production of 2nm chips in 2025 and will use electronic design automation (EDA) software from the US to produce 2nm chips, according to UDN.

• The firm also revealed that the EDA software for advanced procession chips involves collaboration with US firms. In addition, American and European firms also lead other key sub-sectors in chip making, including IP, EUV lithography, and process monitoring equipment.
• A legal representative of TSMC estimated that US EDA software and IP will be at the core of the chip design industry in the next five to ten years, the report said.
• C.C. Wei, chief executive officer of TSMC, said on Aug. 30 that their leading 2nm tech will adopt a new nanosheet architecture, creating chips with stronger performance and endurance, and withstand higher currents.
• Wei also emphasized that TSMC is capable of designing chips itself but chose instead to focus on producing chips for clients.

Context: Last month, the US banned mainland China from accessing EDA software for advanced chipmaking. Meanwhile, the UK declined an acquisition of a local EDA firm by a Chinese company last month due to concerns about potential use by China’s military.

• American EDA firms control over 77% of EDA market shares in China in 2020, according to China’s CCID Consulting.
• Chinese local EDA providers like Primarius Technologies claimed the firm had “formed core key tools that can support advanced process nodes such as 7nm, 5nm, and 3nm,” according to their website.

Update: We have updated TSMC CEO’s name from Wei Zhejia to C.C. Wei.

砸600亿进军半导体！富士康拟在珠海建12寸晶圆厂！ – ICInside

What happened: iPhone assembler Foxconn Technology is preparing to launch a RMB 60 billion (around $9 billion) chipmaking project in China. A majority of the investment is subsidized by the government of the southern Chinese city of Zhuhai. Its plant will churn out chipsets for ultra high-definition 8K televisions and camera image sensors, as well as various sensor chips for industrial uses and connected devices. The aim is to eventually expand the chip facility in Zhuhai to make more advanced chips for robotics and autonomous vehicles.

Why it is important: Cooperation between the government and private companies in China’s semiconductor industry demonstrates the country’s resolve in moving to high-value manufacturing through its “Made in China 2025” industrial policy.  The aim is to build a self-sufficient advanced chip industry to support the country’s technological development. Yet, chip manufacturing is extremely costly and has high barriers to entry. According to sources, the move is expected to position Foxconn as a challenger to TSMC, another Taiwanese chipmaking giant. Additionally, the project is aimed at the company reducing its reliance on Apple as the global smartphone market slows.

Taiwan-based chipmaker TSMC has received the green light to build what is said to be the world’s first 3-nanometer manufacturing plant.

TSMC, currently the world’s largest contract semiconductor manufacturing firm, has been cleared to begin the construction of the new chip factory at the Southern Taiwan Science Park in Tainan, according to Taiwan News report.

The new factory passed the Environmental Protection Administration (EPA)’s environmental impact assessment on Wednesday. There had been concerns about the factory using up an excessive amount of water and power sources. The chipmaker previously promised that the new fab would use 20% renewable energy and 50% recycled water.

TSMC is pouring NTD 600 billion (around $19.5 billion) worth of investment into the construction of the new plant, which is planned to begin in 2020. The chipmaker is expected to enter production trial run in 2021 and begin mass production as early as 2022.

TSMC is building a 5nm chip plant at the same site, which is expected to be completed and running by late next year or early 2020.

The Taiwanese chipmaker reportedly kept the 3nm production schedule confidential in order to prevent its rivals such as Samsung from accelerating investment in 3nm chip production. However, talks about the company’s new 3nm fab have been going on for a while.

Last year, it was rumored that TSMC was considering moving the new facility to the US, lured by incentives offered by Trump administration to bring more manufacturing into the country.

According to local media reports, analyst Wang Zhao Li reckons that the powerful 3nm chip’s main applications will be in cloud computing, artificial intelligence, and 5G. Apple, Huawei, Google, and Nvidia would likely be the potential customers for TSMC’s new chip.

Apple is the Taiwanese company’s largest client, which is said to account for nearly 20% of the company’s revenue.

Computer Virus Cripples iPhone Chipmaker TSMC Plants – Bloomberg

What happened: TSMC has shut down multiple factories after its systems were hit by a computer virus on Friday evening. This is the first time a virus attack has affected TSMC’s production lines. Over the weekend, TSMC recovered most of its equipment that was infected by the virus, which, according to company statement, “wasn’t introduced by a hacker.”

Why it’s important: TSMC, the largest semiconductor manufacturer in the world, is the main supplier for companies like Apple and Qualcomm. The incident is expected to cause shipment delays, additional costs, and other supply chain disruptions. It is still unclear what the implications are for Apple, who is expected to roll out the new iPhone later this year.

Nanjing is set to turn itself into a chip mecca by setting up a $20 billion investment fund for its integrated circuits industry. The historical capital of China is hoping that revenue from the sector will reach $150 billion by 2025.

The Nanjing Integrated Circuit Industry Investment Fund is expected to benefit chip manufacturers and downstream companies, which will gain economically from domestically produced chips. It will be guided by localization, specialization, and better use of capital, and aims to promote the local IC industry, local media reports. The timeline for the fund was not specified.

Nanjing has been the focus of growing attention in China’s chip-making industry. In early July, Huatian Technologies announced a three-phase development plan for an IC packaging an testing plant in the city. The company plans to spend a total of $8 billion on the project that will focus on memory and artificial intelligence chips, as well as microelectromechanical systems (MEMS).

In addition to Huatian, Taiwanese chipmaking giant TSMC and Tsinghua Unigroup have built plants in Nanjing. In 2016, TSMC signed an agreement with the municipal government to make a $3 billion investment in the city in the form of a design service center.

In the past few months, China’s reliance on foreign-made chips has called to attention. The temporary US ban on ZTE purchasing American-made components caused collective reflection on the county’s use of technology that was not domestically made. Local experts said the company should have been more self-sufficient (in Chinese).

Additionally, Chinese officials launched investigations into American and South Korean chipmakers for suspected price-fixing. Investigators were concerned about the increasing prices of chips from Samsung, SK Hynix, and US-based Micron.

China currently sources around 90% of the semiconductors used in domestically-produced products from foreign companies, accounting for 60% of the world’s chip purchases.

The rise of artificial intelligence (AI), Internet of Things (IoT), big data, autonomous driving, and cryptocurrency mining—applications that all require immense processing power—has been fueling a rally in the semiconductor industry.

In 2017, the surge of cryptocurrency prices spurred the cryptomining frenzy worldwide and created explosive demand for cryptomining hardware, like the high-end GPU and ASIC (Application Specific Integrated Circuits) chips used to power the mining machines. This is not only driving growth in foundries and chip manufacturers but also related businesses all the way down the semiconductor industry’s supply chain—design, packaging, assembly, etc.

As the world’s manufacturing backyard, Taiwan’s exports rose by 16.7% to a record US$30 billion in March, which, according to the Ministry of Finance, is “driven by strong demand for high-performance chips, cryptocurrency mining, and artificial intelligence applications.”

Taiwanese companies cashing in on the “crypto gold rush”

TSMC (Taiwan Semiconductor Manufacturing Company) is the world’s largest chip foundry, responsible for over 55% of the world’s chip production and is profiting heftily from the cryptomining boom.

Since the second half of 2017, TSMC has been seeing strong demand from cryptocurrency-related businesses—the company’s fastest-growing segment—which could account for as much as 10% of TSMC’s revenue by the end of 2018.

C. C. Wei, co-chief executive of TSMC, said at the company’s Q1 2018 earnings call that the first quarter revenue of $8.46 billion was “mainly driven by a strong demand from high-performance computing such as cryptocurrency mining and increases from both automotive and IoT.” The company also noted that cryptomining gave a timely boost that offset weaker demand for smartphone sales. In April, the company cut its sales target due to the lackluster performance of Apple’s iPhones.

“TSMC is generating about 6-7% of its sales from the ASICs from customers like Bitmain and also some of the GPUs being used from AMD and NVIDIA,” Randy Abrams, head of Taiwan research and regional semiconductors at Credit Suisse, told TechNode.

Bitmain—the Chinese startup dominating the mining industry—may have made as much as chipmaker Nvidia did last year, according to Bernstein, an investment research firm, estimates.

The foundries are not the only ones reaping profits. The entire semiconductor supply chain—from chip design services to OSAT companies (third-party assembly and test services) to equipment and materials comapanies—have also profited from the rising demand for processing power. Taiwan’s ASE (日月光), the world’s largest OSAT company that handles the back-end packaging and testing orders, has seen strong demand, particularly in high-end GPU and ASIC chips. Abrams says that some of the early chip design companies, despite being China suppliers, still need to do most of their advanced assembly and testing in Taiwan.

Other Taiwanese hardware makers like Gigabyte, MSI, and Asustek—all of which sell graphics boards used in mining machines—have also seen revenue growth. In 2017, Gigabyte sold 4.5 million graphics cards, up one million units on the previous year.

Uncertainties loom over the volatile crypto market

Despite cryptomining-led growth in the semiconductor industry, not many have full faith in it. Crypto is still a nascent market with fluctuating prices and new currencies popping up every week. There is still a lot of speculation about whether the momentum will remain sustainable.

Bitcoin, for example, shows just how much crypto-prices can fluctuate—the price rallied more than 1,400% in 2017 but fell by almost half in early 2018. Collapsing prices could lead to a sudden plunge in graphics cards sales and other collateral damage.

The fluctuating prices of cryptocurrencies are the biggest uncertainties, but other factors could contribute to even more volatility. For example, the demand of mining cards from miners reportedly took a huge plunge in early April because many were waiting for the Ethereum mining machines by Bitmain to come out in the third quarter.

The change in mining technique, reward system (proof of stake) and other speculative demands are all factors that could potentially impact the entire market. Abrams said some companies see the growth continuing, but “we take a discount in our forecasts due to the uncertainty and model it flat, but it could very much swing either way.”

In the first quarter earnings report, TSMC announced that they have modified the forecast for 2018 overall revenue growth from the previously indicated 10% to 15% down to the more conservative 10% in part due to the uncertainty in cryptocurrency mining demand.

“TSMC does not want to invest in much capacity that is unable to be converted to other uses,” Abrams explains. “The market still needs to mature and have more certainty before more suppliers dedicate or invest in specific capacity for mining.”

The shift from GPU to ASICs is another factor that will likely impact the entire crypto market. Unlike the general-purpose GPU chips capable of handling graphics on computers as well as for mining, ASICs are designed to carry out a single task more efficiently: mining cryptocurrency.

Clark Tseng, senior manager for market analysis at the global industry association SEMI, told TechNode that with an array of new cryptocurrencies emerging, the demand will likely shift from GPU to specialized ASIC chips. Tseng said it is hard to tell how quick this transition is going to be, but it is definitely a trend he is seeing. In early 2018, Samsung decided to move into mass production of ASIC chips and claims to have already begun to yield dividends.

The future is larger than crypto

While the impact of cryptomining cannot be underestimated, it would be an overstatement to say that mining is the sole driving force of future semiconductor industry. Applications in AI, IoT, autonomous driving continue to be key drivers of semiconductor revenue. Tseng says that high-performance computing like AI, autonomous driving, and cryptomining will continue to be the key drivers for TSMC and other chip manufacturers for the next 3 to 5 years and companies like Bitmain are likely to foray into other areas other than just cryptomining but AI applications. Bitmain, for example, is moving onto a new trajectory making specialized chips for deep learning and AI applications.

While the crypto market may still be in its infancy, it has already made waves in the global economy. For now, the semiconductor industry is enjoying, perhaps most of all, the soaring profits from the mining craze.