TSMC reports soaring demand for its 7 nm line, due to worldwide development of 5G and accelerated demand from HPC, mobile, and other applications.
TSMC has raised its capital expenditures for this year to as much as $15 billion on an improved outlook for 5G smartphones and related networking equipment.
The company, which said demand has soared for 7 nm, boosted its 2019 capex by half from an original target of about $10 billion. Approximately $1.5 billion of the new budget is allocated for increased production of 7 nm chips and $2.5 billion is allocated for 5 nm, which is slated for commercial production in the first half of 2020.
TSMC will “probably” increase its 2020 capex from this year’s level, according to TSMC CEO C.C. Wei. The company typically waits until the first of each year to forecast its capex for the 12-month period.
Amid the ongoing trade war between the U.S. and China, TSMC appears to be one of the few chipmakers seeing increased demand in China from customers such as Huawei. TSMC said that more than 100 of its over 400 customers are now companies in China.
“N7 (7 nm) will contribute more than 25% of our wafer revenue in 2019, and we expect an even higher percentage in 2020 due to worldwide development of 5G and accelerated demand from [high-performance computing] (HPC), mobile, and other applications,” Wei said at a quarterly results announcement in Taipei.
TSMC CEO C.C. Wei discusses the new business outlook for his company. (Source: TSMC)
In some parts of the world, telcos are accelerating 5G deployment, Wei said (without offering details on specific locations). The momentum is growing, he added. Some analysts guessed that China is behind that demand.
“It’s pretty clear you’re going through a very healthy inflection point with Chinese customers at the moment,” Arete Research Senior Analyst Brett Simpson said on a conference call with TSMC management during the event.
“We are happy to see that growth, and TSMC is offering the most leading-edge technology to support our customers in China,” Wei replied. “We are going to grow with the China market.”
In May, TSMC said it would continue making chips for Huawei even as other companies in the global semiconductor ecosystem are complying with a U.S. ban on supplies to the Chinese electronics company.
IC Insights forecasts 2019 capex figures for the top-ten chipmakers. (Source: IC Insights)
TSMC’s new capex forecast is on a par, in dollar terms, with forecast expenditures this year for Samsung and Intel, according to market research firm IC Insights.
“Overall, we believe that TSMC’s spending surge is more reflective of their individual position in the market rather than an indicator of an industrywide upturn,” IC Insights’ President Bill McClean told EE Times.
The company said that even at the 7 nm node, it is helping customers cut cost. “We improved logic density by 80%, but I did not charge my customers 80% more,” Wei said. “So you know that cost per transistor is lower.”
TSMC said that its overall capacity use is “within reach” of 90%. While the company said its capacity use at the 16 nm and finer nodes is “very healthy,” utilization for older geometries, such as 28 nm, has lagged as a glut of capacity has emerged due to competitors ramping up production.
While competition increases in legacy technology nodes, TSMC expects few challengers at 7 nm and finer geometries that, for the first time, use extreme ultraviolet (EUV) lithography.
“If you compare 28 nm with 7 nm or 5 nm, it’s not a good comparison because 7 and 5 use EUV, and that technology barrier is much, much, much higher than you can expect from high-K metal gate,” Wei said.
Only two other chipmakers, Samsung and Intel, have announced plans to adopt EUV lithography. This year, Samsung started production of chips with EUV a few months earlier than TSMC, while Intel is expected to adopt EUV for production several years from now.
“Although Samsung also offers 7 nm technology as a foundry option, TSMC is now the only pure-play foundry in the world where a company can go for 7 nm production,” McClean said. “Also, TSMC has announced a strong road map for its transition to 5 nm technology — which customers like, knowing they have a path for future production. In general, TSMC has worked its way into a very enviable position in the pure-play foundry business.”