TSMC's Global Distribution

With the global chip shortage in 2021, governments re-understand the importance of the semiconductor supply chain, not only becoming a political and economic wrestling chip but also promoted to "national security issues". The U.S., Japan, and the European Union have offered preferential measures to attract major semiconductor manufacturers to move in, and TSMC's electric orientation and global layout have become one of the focuses of attention.

Looking at TSMC's recent layout, in addition to building new fabs and packaging plants on the island, TSMC has also started to actively expand its production overseas.

TSMC currently has four 12-inch mega fabs (GIGAFAB Facilities), four 8-inch fabs and one 6-inch fab, a 12-inch fab in Nanjing, China, an 8-inch fab in Songjiang, Shanghai, and an 8-inch fab in WaferTech, Washington, U.S. TSMC also has a joint venture with Philips Electronics to establish SSMC fabs for development in Singapore.

The latest overseas layout, in response to the chip shortage impact, TSMC spent $2.887 billion last year to expand 28nm production in Nanjing, China, from the original 40,000 wafers per month to 100,000 wafers, the new capacity is expected to gradually open in the second half of this year; in addition, another $12 billion to build a 5nm fab in Arizona, the United States, is expected to mass production in 2024, with a monthly capacity of 20,000 wafers.

TSMC was invited by the Japanese government to build the TSMC Japan 3D IC Research and Development Center in Tsukuba City, Ibaraki Prefecture, Japan last year to build a research production line and will work with more than 20 Japanese companies such as Shin-Etsu Chemical Industry and Sumitomo Chemical to develop the most advanced semiconductor technology, which will be officially launched this year.

Meanwhile, TSMC is also working with Sony Semiconductor Solutions (SSS) to build a 12-inch JASM fab in Kumamoto, Japan, which is expected to start production by the end of 2024. The capital expenditure is expected to increase from 800 billion yen to 980 billion yen.

Kaohsiung plant is still waiting for the results of the environmental assessment, the expansion of the plant to attack 2 nanometers

In the island layout part, TSMC announced that it will build a new fab in Kaohsiung Nanzhi China oil refinery site, production 7 nanometer and 28-nanometer process, is expected to start construction in 2022, mass production in 2024. However, the preliminary environmental assessment is currently stuck, and the second review meeting is expected to be held on April 7.

In addition, TSMC will spend 800 billion to one trillion yuan to expand the factory in Central Taiwan, rumored to be preparing to set up a 2-nanometer fab. The Ministry of Science and Technology announced that the Taichung campus expansion plan has been approved by the Executive Yuan and is expected to provide manufacturers with factories in 2023 at the earliest, which is expected to create an annual output value of about 485.7 billion yuan.

At present, TSMC's main advanced packaging is located in Longtan, Taoyuan. In order to cope with the continuous expansion of 5nm orders, TSMC is actively building advanced packaging sites in Zhunan and southern Taoyuan, and Zhunan advanced packaging plant will start receiving orders and injecting power this year, which is expected to support TSMC's 5nm expansion and future 3nm mass production.

In addition to Miaoli Zhunan, which has already been confirmed, there are rumors in the market that a new factory may be built-in Chiayi and Yunlin.

TSMC announced that this year's capital expenditure will reach $40 billion to $44 billion, compared to $30 billion in the past 2021, a significant increase of 33-46%, of which 70% to 80% for advanced processes at 2 nm, 3 nm, 5 nm, and 7 nm; about 10% for advanced packaging and photomask production; about 10% to 20% for special processes.

According to statistics, TSMC's market share in the foundry is as high as 53.1%, and the market share of advanced process chips alone is over 90%, so every move has become the focus of attention.

Japan and the European Union have offered a series of incentives to welcome TSMC and other foreign manufacturers to enter, while supporting local semiconductor companies, the United States and China are regarded as a technological war of wrestling, have promoted the localization of semiconductor manufacturing, hoping that in artificial intelligence, 5G and other new technology applications, in this key industry to master the dominant position.

Global Competition Is Hot

At the same time, the competition for semiconductors around the world is hot.

The U.S. House of Representatives passed the America COMPETES Act of 2022, which will allocate $350 billion to strengthen U.S. manufacturing, R&D, and other areas, including $52 billion to encourage the U.S. private sector to invest in semiconductor production and R&D of key components such as automobiles and computers; and $45 billion over the next six years to maintain the resilience of the U.S. supply chain. The bill includes $45 billion over the next six years to maintain the resilience of the U.S. supply chain and ensure that key products are made here in the United States and $160 billion to invest in technology research and development and innovation.

The House of Representatives passed the bill after the Senate passed the $250 billion US Innovation and Competition Act (USICA) last year, authorizing $190 billion over five years to fund scientific research and development, and $52 billion to accelerate U.S. semiconductor production and research to counter China's rising technological power. The US Innovation and Competition Act (USICA) authorizes $190 billion over five years to fund scientific research and development and allocates $52 billion to accelerate U.S. semiconductor production and research to counter China's rising technological power.

Since the Senate and the House of Representatives have passed different versions, both sides need to obtain consensus, integrate into a new version, and obtain congressional support before sending it to the White House for President Biden's signature on the legislation.

The Japanese government announced an "emergency strengthening program for the semiconductor industry", divided into short, medium and long-term three-stage promotion, the first round of measures will ensure Japan's domestic advanced semiconductor production capacity, to attract overseas manufacturers to set up factories in Japan, to update Japan's existing old semiconductor plant equipment, and to provide assistance in the form of grants divided into several years, but the condition is that the industry in Japan for at least 10 years of continuous production.

At the same time, in order to boost the economy, the Japanese parliament approved the highest amount of 2021 supplementary budget in history, nearly 36 trillion yen, of which 617 billion yen (about NT $153.6 billion) as a new fund to subsidize the semiconductor industry, including 400 billion yen to subsidize TSMC's Kumamoto plant, the remaining 200 million yen to subsidize Micron, Kioxia, and other suppliers to set up factories.

The second and third stages (medium and long term) will be to conduct research and development of next-generation semiconductor technology with the U.S. and to establish an international cooperation system that allows for industry-academia cooperation with global companies.

In order to reverse the widening gap in advanced technology between the U.S., East Asian countries, and other competitors, the European Union has introduced the European Chip Act, which is expected to invest more than 43 billion euros in public and private investment by 2030 and allocate another 11 billion euros in public funds to strengthen semiconductor research, design, and production, with the goal of doubling the market share of European chips from 10% to 20% by 2030.

In the U.S.-China technology war, the U.S. sanctions, and other multiple pressures, the Chinese government is pouring the country's efforts, the use of subsidies and low-interest loans to foster the autonomy of the domestic semiconductor industry. Mainland China aims to increase its semiconductor self-sufficiency rate from less than 10%, 40% by 2020 to 70% by 2025.

In addition, Beijing authorities are subsidizing chip equipment makers to avoid challenges to domestic production targets due to machinery shortages, a sign of China's ambition.

Although South Korea Samsung, SK Hynix create a memory kingdom, in addition to the memory industry, other chip areas lack of IC design, materials to production ecosystem supply chain, so the South Korean semiconductor industry in the competition, gross profit growth is not as prominent as Taiwan and China, and Samsung in the wafer foundry and TSMC chase quite hard.

In response, the South Korean government announced the "K semiconductor strategy", the next 10 years is expected to invest 510 trillion won, targeting Samsung Electronics, SK Hynix, and other 153 companies to provide funding, policies, tax incentives, and other support, hoping to establish a semiconductor production, raw materials, components, equipment and cutting-edge equipment, design and other industrial clusters, the goal is to build the world's largest semiconductor manufacturing base by 2030 The goal is to build the world's largest semiconductor manufacturing base by 2030 and to lead the global semiconductor supply chain.

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