TSMC builds chips 1/5000 the thickness of a human hair in a fab as big as 20 soccer fields

PUBLISHED : Wednesday, 09 October, 2013, 3:28pm
UPDATED : Wednesday, 09 October, 2013, 3:40pm

Top contract chip maker TSMC may have outsmarted rivals Samsung Electronics and Intel in the race to build the tiniest and most powerful chips for smartphones and tablets by building big.

As mobile devices get slimmer and demand increases for more data-processing and power-saving features, chip companies are trying to cram more power into tinier chips and are building futuristic factories, or fabs, to meet global demand.

At a new site the size of about 20 soccer fields in southern Taiwan, Taiwan Semiconductor Manufacturing Co is building foundry facilities to manufacture chips smaller than 1/5,000 the size of a human hair. Dozens are embedded into smartphones.

TSMC plans to invest NT$500 billion (HK$132 billion) and hire 7,000 workers for the new facilities, where the first 20 nanometer chips are expected to start rolling off the mass production line some time early next year.

Rivals Intel and Samsung Electronics, the world’s No 1 and No 2 chipmakers, are also building capacity and spending billions of dollars on new fabs to crack into the lucrative business that the Taiwanese firm dominates.

The foundry business “will continue to grow solidly on the back of a booming mobile industry, and TSMC will see more players in the market, as many are envious of its nearly 50 per cent profit margin”, said Doh Hyun-woo, an analyst at Mirae Asset Securities in Seoul.

[The foundry business] will continue to grow solidly on the back of a booming mobile industry
Analyst Doh Hyun-woo

“TSMC remains by far the biggest player in foundry, and it’ll continue to dominate, as it’s got the biggest capacity and best foundry technology. But margins are set to come under pressure, as it will see more competition from the likes of Samsung.”

To keep its position as the world’s top foundry business, TSMC must invest even more on research and development to boost profitability, says Warren Lau, a Hong Kong-based analyst at Maybank Kim Eng Securities.

Unlike the South Korean and US companies, which design and make their own chips, TSMC makes chips for designers that do not have a production factory.

Samsung’s major system chip clients are Apple and Qualcomm. TSMC’s clients include Qualcomm and other chip designers, such as Texas Instruments and Nvidia.

These firms, in turn, sell chips to smartphone makers like Samsung, Apple, Taiwan’s HTC and mainland China’s Huawei Technologies.

Intel is new to the foundry business but has already poached programmable microchip leader Altera from TSMC, winning its contract with 14nm technology.

California-based Intel is set to open fabs in Oregon and in Arizona this year to produce microprocessors. However, in July, it cut its overall this year capital spending plan for the second time, to US$11 billion from US$13 billion at the start of the year, as PC demand slowed.

Video: TSMC ad promotes the company's fabs

TSMC appears to have staged the biggest coup. Media reports, analysts and industry sources say the company has snatched the Apple contract from Samsung, and that its new 20nm chips will be used in future iPhones and iPads.

In the secretive world of hi-tech, there has been no official word on Apple parting company with Samsung.

But Apple has made no secret it wants to diversify from Samsung as the two rivals battle for leadership in the smartphone market and contest a rash of patent disputes.

TSMC’s sales shot up 19.3 per cent in the first eight months of this year from a year earlier thanks to increased chip sales.

Standing on a site that was a sugar cane field about two decades ago, TSMC’s fab in southern Taiwan is the world’s largest logic chip factory and produces 40nm and 65nm chips for low-end smartphones and tablets.

In a dimly lit, climate-controlled room, masked engineers dressed in “bunny suits” work with robots assembling wafers. Machines outnumber workers 20 to one. By the end of the year, the company envisages that will increase to 75 to one.

Before entering the fab, jumpsuited visitors pass through a “dust-blowing” corridor.

“The suits are for protecting the wafer, not you,” a TSMC spokesman said. “Even a single hair or a sneeze will damage our wafer.”