TSMC to build wafer fab in Japan, mass production set to start in 2024

10/14/2021 08:30 PM
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Taipei, Oct. 14 (CNA) Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chipmaker, announced on Thursday that it will build a 12-inch wafer fab in Japan with mass production set to start in 2024.

At an investor conference, TSMC CEO C.C. Wei (魏哲家) said construction of the wafer plant is scheduled to begin in 2022, and based on the chipmaker's initial planning, the new factory will roll out specialty chips using the company's mature processes for 22 nanometer and 28nm technologies.

The plan to set up a production site in Japan is expected to help the company recruit talent worldwide, further extend its reach in the global market and ultimately satisfy demand from clients, Wei said.

TSMC expects the investment in Japan to reap reasonable returns, strengthen the company's bottom line and create benefits for shareholders in a longer term, he added.

The chips rolled out based on the 22nm and 28nm processes are expected to be used in products ranging from imaging sensors to micro control units (MCU) for car production, market analysts said.

Wei did not disclose any financial terms for the investment in Japan but said the funds used in the project will be additional to the company's already announced spending of US$100 billion over the next three years.

Although the Japanese government and its clients in Japan have voiced support for the investment, the plan still has to be approved by TSMC's board members,

Reports from Japan recently said TSMC will build a wafer plant in Kumamoto on Kyushu Island by joining forces with Japanese clients including Sony Corp. to invest 800 billion Japanese yen (US$7.07 billion). Sony is using TSMC's chips to produce imaging censors.

Meanwhile, a research report released by a U.S. brokerage overnight raised questions about a possible delay in trial production of the chipmaker's advanced 3nm process until the first half of next year from the previously planned trial in the second half of this year due to technology problems in development.

However, Wei disputed the research note, saying trial production of its 3nm process will start later this year on schedule and mass production will kick off in the second half of next year.

The chipmaker aims to start commercial production of the N3E process, which is based on the 3nm technology, and the new process will produce more efficient chips with a better yield rate, he said.

Before the 3nm process, the 5nm process is the latest technology for which TSMC has launched mass production. The chipmaker is also developing the more sophisticated 2nm process.

Commenting on the 2mn process, Wei said mass production is scheduled to start in 2025. It is the first time TSMC has revealed a timeframe for the 2nm process development.

Wei said TSMC's 2nm process, which will use the Gate-All-Around (GAA) structure to reduce undesirable variability and mobility loss, is expected to be the most competitive on the market.

After posting a new high in sales in the third quarter, TSMC's chief financial officer Wendell Huang (黃仁昭) said, the company expects to continue to smash records in the fourth quarter, when its consolidated sales are expected to range from US$15.4 billion to US$15.7 billion, with the median US$15.55 billion 4.5 percent higher than the third quarter.

The forecast is in line with a market estimate of 2.5-5 percent sequential increase in sales for the October-December period.

TSMC's gross margin -- the difference between revenue and cost of goods sold -- is estimated to range between 51 percent and 53 percent with the median 52 percent topping the third quarter's 51.3 percent, Huang said.

However, the company's operating margin -- the difference between sales, the cost of goods sold and operating expenses -- will fall to 39-41 percent in the fourth quarter from the third quarter's 41.2 percent due to the company spending about US$175 million to purchase 5 million doses of the Pfizer-BioNTech COVID-19 vaccine as a donation to the government, he added.

The vaccine expenses are expected to cut its operating margin by one percentage point in the fourth quarter, Huang said.

TSMC has left its capital expenditure worth US$30 billion unchanged for 2021, he added.

The company expects to see its sales rise about 24 percent from a year earlier in 2021 in U.S. dollar terms, with the worldwide tight chip supply expected to continue into 2022, Wei said.

Before the investor conference began, TSMC announced its net profit for the third quarter hit a new high of NT$156.26 billion (US$5.58 billion), up 16.3 percent from a quarter earlier and also up 13.8 percent from a year earlier.

(By Chang Chien-chung and Frances Huang)

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