This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.
The Taiwan Semiconductor Manufacturing Company (TSMC) has responded to reports claiming that its leading edge 3 nanometer (nm) chip manufacturing process technology is suffering from delays. Earlier today reports from research firms TrendForce and Isaiah Research outlined that TSMC’s 3nm process will face delays and affect the company’s partnership with US chip giant Intel Corporation – which itself has suffered from manufacturing problems for several years.
TSMC’s response was standard boilerplate as the company refused to comment on its customer orders and outlined that the manufacturing technology was proceeding according to schedule.
TSMC Stresses That Capacity Expansion Plans Are On Schedule Following Reports Of Hiccups
The two reports were the latest in a series of news that has cast doubt on TSMC’s 3nm manufacturing plans. The first bit of news came earlier this year when it was initially rumored, and then confirmed that Korean chip manufacturer Samsung Foundry will kick off 3nm production before TSMC.
Statements made by TSMC’s chief Dr. CC Wei has outlined that his company will start manufacturing the 3nm chips during the second half of this year. as TSMC seeks to maintain the technological prowess that has made it into the world’s largest contract chip manufacturer.
TrendForce’s report shared that the firm believes that the delay in 3nm manufacturing for Intel will hurt TSMC’s capital expenditure as it might end up reducing spending in 2023. It also did not shy away from laying some of the blame on Intel, claiming that design issues had initially caused the manufacturing to skip to 1H 2023 from 2H 2022 – which has now been delayed to late 2023.
This in turn has affected TSMC’s capacity utilization estimates – and the firm is wary of capacity lying idle as it struggles to procure 3nm orders. TrendForce also shared that Apple will be the first 3nm TSMC customer – with products coming out next year, and AMD, MediaTek and Qualcomm will mass produce 3nm products in 2024.
Isaiah Research was more forthcoming with the specifics of the delay, as it shared the number of wafers initially expected to be manufactured and the decrease after the purported delay. Isaiah outlined that TSMC had initially planned to churn out 15,000 to 20,000 3nm wafers per month by the end of 2023 but this has now been reduced to 5,000 to 10,000 wafers per month.
However, addressing the worries of spare capacity left due to the reduction the research firm remained optimistic as it pointed out that the majority of equipment (80%) for advanced manufacturing processes such as 5 nanometer and 3 nanometer is interchangeable, implying that TSMC retains the ability to utilize it for other customers.
TSMC’s response to the entire affair sent out to the Taiwanese publication United Daily News was brief, with the firm stating that:
“TSMC does not comment on the business of individual customers. The company’s capacity expansion project is proceeding as planned.”
The semiconductor industry, which is currently facing a historic downturn due to demand and supply mismatches in the wake of the coronavirus pandemic, has been considering capacity and capital expenditure reductions for quite some time. Chinese foundries have reduced their average selling prices (ASPs), and chipmakers in Taiwan have started to offer different prices for different nodes to ensure that demand does not taper off.
TSMC, however, has made no such announcements, and the question of balancing capacity reductions with a pickup in demand, particularly for newer products remains a thorn in the side of chipmakers, as at one end they risk spending too much on idle machines and on the other, reducing revenue capture in the case of a demand pickup.