TSMC’s 2nm chip fab construction in full swing

International Business News – TSMC has begun full-scale construction of a new factory for the world’s most sophisticated semiconductor with 2nm chips. The Nihon Keizai Shimbun took aerial photos of the factory construction by drone from the sky over Hsinchu in northern Taiwan, where TSMC is headquartered. The semiconductor market has seen a sharp decline since the summer of 2022, but TSMC has not slowed down its investment. Against the backdrop of concerns over the situation in the Taiwan Strait, a glimpse of the further concentration of cutting-edge semiconductors in Taiwan can be seen in the latest images.

Sixty kilometers southwest of Taipei City is the “Taiwan Silicon Valley”, a technology park that can be described as the heart of Taiwan. Like TSMC’s headquarters, many related companies from inside and outside Taiwan are lined up.

In the hilly area behind TSMC’s headquarters, the construction of a new 2nm (1 billionth of a meter in nanometer) chip fabrication plant has started as planned on a vast area of about 550,000 square meters, equivalent to about 12 Tokyo Dome stadiums.

A drone shot by the Nihon Keizai Shimbun gained TSMC’s understanding. In the image taken 110 meters above the ground, the vast area of land can be seen to be dug up, and several large cranes are set up, with trucks transporting materials frequently coming and going between them.

Suppliers say the cost of a single plant for a 2-nanometer chip is around 2 trillion yen (104.5 billion yuan). Taiwan Semiconductor plans to build four such plants here. For Taiwan Semiconductor, it is also the biggest project ever. It plans to start mass production as early as 2025, two years from now. Construction is proceeding at a fairly tight schedule.

In the global semiconductor industry, the gap between manufacturers has widened especially in the last 3 years. In the spring of 2020, when the new crown epidemic was spreading around the world, TSMC pushed ahead with mass production of its then state-of-the-art 5nm chips, sending the industry into a frenzy.

Competitors in a bitter battle

On the other hand, its biggest competitor, South Korea’s Samsung Electronics, also dabbled in 5nm chips, but “yields have not improved and are in a bitter battle” (Japanese supplier executives). The United States Intel is far behind, the industry has since entered the “TSMC a strong era”.

TSMC succeeded in mass production at the end of 2022 of the cutting-edge product 3nm chips, which are further ahead of 5nm chips. Taking advantage of this momentum, TSMC has launched the construction of a new factory for ultra-advanced semiconductor 2nm chips beyond 3nm, and this is the current situation of TSMC.

Compared to the current state-of-the-art 3nm chips, the processing performance of 2nm chips is 10-15% higher. The power consumption can be reduced by 25-30%, and the “standby time” of smartphones and other devices can be extended.

The difficulty of producing 2nm chips is particularly high, and it has special significance for the chip industry. If TSMC succeeds in achieving mass production, the monopoly position of TSMC, which holds more than 90% of the global market share of cutting-edge chips, may be further strengthened.

TSMC is expected to break through significant barriers at a completely different level in the 2nm chip field, in addition to the technological advancement of traditional semiconductors that reduce the line width of electronic circuits.

The evolution of semiconductors has long been built on narrowing the line width of electronic circuits on semiconductor substrates (wafers) in nanometer increments. This is because with finer line widths, more transistors and other important components can be carried, enhancing the performance of semiconductors by increasing processing speed. However, the industry has faced difficulties since the start of mass production of 5nm chips in 2020.

This is because the semiconductor design structure known as “FinFET” used in the last 10 years has reached its limits. If you try to further reduce the line width of the electronic circuit, the phenomenon of large current leakage to where there should not be current will occur frequently.

In order to prevent such current leakage, the companies are in fierce competition, and the long-term push to develop a new design structure called “nanosheet” ， which is known as surround-type gate technology (gate-all-around, or GAA). TSMC has been investing in this development for about 15 years.

The United States IBM, Intel and Samsung have also been promoting the development, but requires extremely fine processing technology, mass production is extremely difficult. Samsung partially introduced the technology in 2022, but is “in a situation where it is struggling to get into production”. Japan’s Rapidus,which was established in the summer of 2022 to promote the localization of cutting-edge semiconductors, has also acquired technology from IBM and is striving to achieve mass production, but whether it will succeed is still unknown.

2nm chips using nanosheets will be the most sophisticated and best technology – In August 2022, TSMC’s Chief Executive Officer (CEO), Chieh-Jia Wei, showed great confidence in the practicalization of 2nm chips in front of the supplier management and others present at a technical briefing held in Hsinchu, where the headquarters is located.

In January 2023, at a press conference, Mr. Wei again stated that the development of the 2nm chip was progressing faster than expected, again emphasizing the smooth progress. The progress of the work already started also reflects this confidence.

Not slowing down the pace of investment

The current semiconductor market is affected by global inflation and economic slowdown, facing a decline in demand starting in the summer of 2022. In particular, the low demand for chips used in personal computers and smartphones has presented a situation where even TSMC’s factory openings have declined.

Nevertheless, TSMC is still expected to launch up to $36 billion in equipment investment this year, and the pace of investment in Taiwan in cutting-edge areas directly related to competitiveness has not slowed down. In Tainan City in the south, where TSMC’s second largest base after Hsinchu is located, the production of 5 factories for 3nm chips, which will start mass production by the end of 2022, is also progressing rapidly.

The excessive concentration of cutting-edge semiconductor products, which account for more than 90% of the global share, in Taiwan will further intensify in the future. According to the Nihon Keizai Shimbun, the number of new plants for cutting-edge products (7nm chips and above) announced by TSMC after 2020 will reach 16 in Taiwan alone.

As for TSMC overseas, there are only 2 plants in Arizona, USA. In addition, the launch of mass production of 3nm chips in the United States will have to wait until 2026, four years later than Taiwan.

Although the risks in the Taiwan Strait are pointed out, the situation of excessive concentration of semiconductors in Taiwan is actually strengthening at the moment. This risk may further increase in the future.