Editorial by BING-JHEN HONG / iStock via Getty Images

Taiwan Semiconductor (TSM) foundry’s global share has been over 50% since 2014 when the company started ramping up production at the 16/20 nm node. By the end of 2020, TSMC’s share has grown to 57% of the global foundry market, and 41% of its revenue comes from semiconductors manufactured at the 14nm node and smaller.

Chart 1 shows the gross margin per node for an IC device. This in part explains the rationale for TSMC’s business model to move to advanced nodes, while also explaining why the company chose to leave its 28nm node under-provisioned until recent external forces prompt it to build its factory. in China.

Gross profit per 300mm is $ 2,835 for a 28nm node versus $ 8,695 for a 3nm node.

TSM Gross Profit Per Wafer Node (US Dollar)

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Graph 1

The high profit potential of small knots is a driving force for other competitors. Currently, Chinese foundries such as SMIC (OTCQX: SMICY) and Hua Hong Semiconductor are limited to the 14nm node due to US sanctions. The Taiwan UMC (UMC) chose to stay at node 14nm and above, as these nodes represent the majority of the foundry’s customer demand.

But Samsung Electronics (OTC: SSNLF) and Intel (INTC) laser focus on nodes Sub-100nm lithography: market analysis and strategic issues. “

TSMC vs. Samsung vs. Intel in the next 5 years

Fabulous new construction

To understand the competition between TSMC, Samsung Electronics, and Intel, we need to look at the fabulous build expected over the next few years, as shown in Table 1.

This shows that Samsung and Intel will increase their competitiveness compared to TSMC and at the same time TSMC will continue to develop to maintain its competitive position.

TSMC, Samsung and Intel fab build table

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Investment expenditure

The capital expenditure is a combination of construction and manufacturing equipment in a ratio of approximately 50:50. Table 2 shows the capital spending for TSMC, Intel, and Samsung between 2018 and 2023. Samsung’s capital spending is for foundry only and does not include spending on DRAM or NAND.

In 2021, TSMC was the biggest spender, with investments of $ 28.5 billion, an increase of 66.6% from 2020. Samsung’s investments only increased by 0.2% in 2021 , but that followed a 113.8% increase in 2020. In 2022, Intel is expected to increase capital spending by 43.2%.

Nevertheless, between 2020 and 2023, TSMC’s capital expenditure is higher than that of its competitors Intel and Samsung. This increased expense will lead to increased manufacturing capacity and increased chip production.

Capital expenditure for TSMC, Intel and Samsung

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Node transitions

Competition between the three companies making

TSMC

In terms of 4nm, TSMC launched N4P in October 2021, which is the third major upgraded version of the TSMC 5nm family.

  • The efficiency of the N4P increased 11% faster than the original N5 and 6% faster than that of the N4.
  • Compared with N5, the power consumption efficiency of N4P is 22% higher, and the density of the transistor is increased by 6%.
  • At the same time, N4P reduces the complexity of the process and improves the chip production cycle by reducing the number of layers of light masks.

TSMC will mass-produce a 3nm process in Q4 2022.

  • In terms of 3nm, TSMC still adopts FinFET architecture and its research and technological development is completed.
  • TSMC recently began carrying out the initial pilot production of officially offline 3nm test chips at the Fab 18B factory.

TSMC plans to introduce GAA (Gate All Around) technology when it enters the 2nm process and begins mass production of 2nm process chips in 2024.

Samsung

Samsung Foundry has already started mass production of chips based on its 4nm process and will start mass-producing 3nm-based semiconductor chips in 2022.

  • The company’s 3nm process uses GAA design with MBCFET (Multi-Bridge-Channel FET) for up to 35% reduction in case area, 30% higher performance or 50% lower power consumption compared to its 5nm EUV process.
  • Samsung earlier revealed that in the first half of 2022, it will launch the first generation of 3nm 3GAE technology (3nm full gate at the start).
  • In 2023, it will launch a new generation of 3nm 3GAP technology with a focus on high performance operation.

In 2025, the 2nm 2GAP process will be put into production. The 3nm yield is also approaching its 4nm process.

Intelligence

Intel stuck in the 14nm process for seven years, and it wasn’t until 2019 that they actually mass-produced 10nm, which was equivalent to the number of transistors in the 7nm TSMC process.

Intel renames its future process nodes:

2022 H2, Intel 4: Previously known as Intel 7nm. Intel expects a 20% performance-per-watt boost over the previous generation, and the technology uses more UVU, primarily in BEOL.

2023 H2, Intel 3: Previously known as Intel 7+. Increased use of UVU and new high density libraries. Intel 3 will share some features of Intel 4, and Intel expects a manufacturing ramp up in the second half of 2023 with an 18% performance per watt boost over Intel 4.

2024, Intel 20A: Formerly known as Intel 5nm, Intel has changed to a two-digit denomination, where A stands for Ångström, or 10A equals 1nm. Intel will switch from FinFETs to its version of GAA transistors called RibbonFET.

2025, Intel 18A: Intel plans to have an 18A process in 2025. 18A will use ASML’s latest EUV machines, known as High-NA machines, which are capable of more accurate photolithography.

Takeaway for investors

Current financial measures

Currently TSMC is the best investment based on financial metrics. Chart 2 shows the% change in revenue (“TTM”) for TSMC, Intel and Samsung over a 3 year period. TSMC’s performance is 6 times better than its competitors.

Fabrication de semi-conducteurs à Taïwan, Intel et Samsung Electronics : chiffre d'affaires <span class=

YCharts

Graph 2

Chart 3 shows the percentage change in BPA (“TTM”) for TSMC, Intel and Samsung over a 3 year period, again showing significant performance from TSMC. Samsung’s low revenue is attributed to a significant decline in the memory market in 2018-2019 due to overcapacity of vessels caused by overbuilding and excessive capital spending during the period 2017-2018.

Fabrication de semi-conducteurs à Taiwan, Intel et Samsung Electronics : EPS dilué (<a href=

YCharts

Graph 3

Chart 4 shows the% change in gross profit margin for TSMC, Intel and Samsung over a three-year period, again showing significant performance from TSMC. Again, Samsung’s poor performance is attributed to the significant decline in the recovering memory market.

graphic

YCharts

Graph 4

The three financial charts above indicate that TSMC has maintained a lead over the past three years, related to the technological mastery of its overall foundry model, and not just in

The next 5 years

Strong current TSMC customer base

But what about the next five years, which is the subject of this article? On a competitive basis with Samsung and Intel making smaller and smaller nodes, TSMC is clearly ahead of its roadmap. TSMC also counts several leading semiconductor companies among its customers, whose growth over the past few years has been a catalyst for TSMC’s performance. These include Apple, AMD, Nvidia, and Marvell Technology.

Samsung’s 2nm GAA Could Attract Customers

Thanks to its multi-year contract with TSMC, Apple basically has priority for the next 3nm and even 2nm nodes. But other companies could migrate to Samsung in the short to medium term, not because of node migration, but because Samsung is expected to be the first to adopt the most efficient GAA transistors for its 3nm nodes which are expected to become operational. in 2022, while TSMC still plans to use FinFET technology for its 3nm nodes and will not migrate to GAA until its 2nm node, as noted above. These include AMD and Qualcomm (QCOM). Qualcomm is one of the world’s largest chipmakers who use third-party factories for their products. It is already known to distribute orders between Samsung and TSMC.

Intel with late but solid design prospects

Intel is resurrecting its technological prowess, as noted above. But at the same time, it has to compete with AMD in processor space. Intel will contract TSMC for 3nm capacity in 2022. Intel is preparing to compete with TSMC once its new factories are operational. Qualcomm will already start having its chips manufactured by Intel in the coming years using Intel’s upcoming 20A process. As noted above, Intel’s technology roadmap sets its 20A process at 5nm with an introduction date set at 2024.

Under its new CEO, Intel has energy, and that could be an advantage over the competition. We don’t hesitate to spend money on chip design. For example, director of Mac System Architecture Jeff Wilcox originally joined Apple from Intel in 2013 and now returns to Intel as he works on the introduction of new processors.

Watch for a global oversupply of chips in 2023

Finally, another headwind for TSMC is a global oversupply of chips caused by the significant amount of fabulous manufacturing that I noted in Table 2 above. I first alerted readers in my Seeking Alpha article from June 25, 2021 titled “Applied Materials: Tracking A Likely Semiconductor Equipment Meltdown In 2023”. Other companies have subsequently made these statements.

Table 3 shows my forecast for semiconductors between 2021 and 2025. It shows a sharp drop in revenue in 2023 and continued negative growth in 2024.

Semiconductor forecast 2021-2025

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According to our report entitled “Global Semiconductor Equipment: Markets, Market Share, Market Forecast“, semiconductor equipment revenue is also expected to decline in 2023.