Is TSMC the largest chip manufacturer?

TSMC (NYSE: TSM) is headquartered in Hsinchu, Taiwan. Founded in 1987, TSMC has since become the world’s largest pure-play foundry, driving technological innovation and economic growth. Its advanced chip fabrication capabilities cater to multiple industries, from consumer electronics to automotive and aerospace.

TSMC’s influence reaches far and wide, with major tech companies like Apple among its largest customers.

By continuously pushing the envelope of smaller process nodes, TSMC has enabled the development of cutting-edge devices and technologies. As TSMC leads the way in semiconductor manufacturing, it shapes the future of technology, impacting economies, national security, and the world of innovation.

TSMC is bigger than all other chip manufacturers combined. It dominates the industry of chip manufacturing by holding a whopping 55% of the market share alone.

What is Fab?

“Fab” refers to a semiconductor fabrication facility. These “Fab” facilities are specialized manufacturing plants dedicated to the production of semiconductor devices, integrated circuits (ICs) or microchips.

Semiconductor fabs are meticulously designed environments for the precise and complex processes involved in semiconductor manufacturing. They typically have multiple crucial stages, including wafer fabrication, which involves processing the semiconductor material to create individual chips, and assembly and packaging, where the chips are assembled and prepared for integration into electronic devices.

Key characteristics of a semiconductor fab include:

Cleanroom Environment: Fabs maintain exceptionally clean and controlled environments to prevent contamination that could disrupt semiconductor production. Even minute particles of dust or contaminants pose significant risks.

Advanced Equipment: Fabs are equipped with cutting-edge machinery and specialized tools, such as photolithography machines, chemical processing equipment, and testing devices, all designed to ensure precision and high production efficiency.

Advanced Materials: The use of high-purity materials and chemicals in Fabs is of enormously important to ensure the quality and reliability of semiconductor devices.

Process Complexity: Semiconductor manufacturing involves a series of intricate processes, including etching, deposition, doping, and more, each demanding specialized equipment and expertise.

Multiple Cleanroom Levels: Fabs often have distinct cleanroom levels, with the most stringent controls and cleanliness requirements in areas where the most sensitive manufacturing steps take place.

Energy and Resource Intensive: Semiconductor fabs are renowned for their substantial energy consumption and resource utilization due to the rigorous manufacturing processes and high-tech equipment.

Semiconductor fabs hold a critical position in the electronics industry because they produce microchips that power devices ranging from smartphones and laptops to automotive electronics and industrial machinery. The design, construction, and operation of fabs demand significant investments and expertise, making them difficult and critical to setup.

The biggest Semiconductor Fabrication Plant

TSMC has the biggest capacity for semiconductor chips or wafers in the world.

3nm Chip

3nm is TSMC’s latest process technology which makes chips which are highly advanced than any other chip in the market. Compared to the latest chips 3nm is 18% faster, 32% reduced power consumption at the same speed and 60% increase in logic density.

This would mean these chips will be smaller, much more powerful and at the same time they will consume a lot less power. This will result in a slimmer design, longer battery life and much less heat generation for the appliances using these chips.

It doesn’t come as a surprise that the biggest customer is Apple for these chips which is planning to use these chips in A17 bionic & M3 processors.

Towards the end of 2022, TSMC announced that a second Fab (other than the one in Arizona) in US is about to begin the production for the 3nm chip by 2026. Another Fab of TSMC located in Japan is trying to start the production of the same 3nm chip by 2024.

Is TSMC a good stock to buy?

TSMC (NYSE: TSM) is definitely a stock to keep an eye on. Its 30% down from its All-Time-High in 2021. The stock price dropped more than 50% during the interest rate hike cycle of 2022. But withe current expansion in production and the demand of chips greatly more than the capacity indicates higher prices for the stock in the coming days.

Why is TSMC so important?

TSMC dominates the chip and wafer manufacturing sector with over 55% of world’s supply alone.

These chips are the foundation of all processors, computers, mobile, smart devices including cars and all AI companies like ChatGPT.

Without these chips that TSMC manufactures, none of these industries would be able to meet their goals of production. This puts TSMC in an extremely critical and important position for the world.

Because of TSMC’s leadership in semiconductor manufacturing, its a critical supplier to a wide range of industries. TSMC also leads with technological advancement like its latest 3nm chip, which makes it a vital and influential leader in the global technology landscape.

TSMC’s impact are felt not only in the world of technology but also in economics, national security, and geopolitics because of it being criticality to the supply chains of so many industries globally.

Why is Taiwan the only Chip Manufacturer?

“Making advanced chips requires using complex software, explosive chemicals, ultra-pure silicon, and machines costing hundreds of millions of dollars to pattern billions and billions of nanometer-sized transistors onto silicon wafers. For the past half-decade, TSMC has been the world’s leader, its engineers pioneering secret methods to pattern chips with unprecedented accuracy at unparalleled scale.”

Chris Miller in Time Magazine

Taiwan has been dominating the chip manufacturing mainly because of TSMC.
TSMC was found in 1987 and since then they have relentlessly pursued excellence in chip manufacturing.

Its not just the investments made into facilities and sophisticated machines but also 3.5 decades of experimentation, excellence in engineering and talent attraction that has helped Taiwan and TSMC develop industry leading secret methods to make these chips with such high accuracies and at such a massive scale.

Why can’t US make Semiconductors?

In 1990s US was manufacturing over 37% of the world’s chip supply according to this report by Semiconductor Industry Association. But as of 2022, US is making under 10% of the global chip supply.

The decline in production happened because it was cheaper to outsource manufacturing for US than to make it at home. Cheaper facility costs, cheaper labour and talent availability in Asia made it a much more attractive to manufacture in Asia. On top of that, those foreign governments offered grants and subsidies to attract more manufacturing at those times and also the regulations were a lot less stricter compared to US.

Although now there is awareness that the chip dependency has to be reduced on foreign countries and a lot of new projects are coming up after the Govt announced the semiconductor package in 2021.

There are a lot of new projects announced and it will take a few years for US to be back in the game for chip manufacturing.
Below are the details of the biggest projects announced so far (according to SIA, Semiconductor Industry Association):

$300 million Tesla Supercomputer ‘Dojo’

10 Biggest semiconductor companies in US