Tag: TSMC

  • The Challenge of Capacity

    The rise of Asia as a force to be reckoned with in large scale manufacturing of critical components like batteries, solar panels, pharmaceuticals, chemicals, and semiconductors has left US and European governments seeking to catch up with a bit of a dilemma.

    These activities largely moved to Asia because financially-motivated management teams in the West (correctly) recognized that:

    • they were low return in a conventional financial sense (require tremendous investment and maintenance)
    • most of these had a heavy labor component (and higher wages in the US/European meant US/European firms were at a cost disadvantage)
    • these activities tend to benefit from economies of scale and regional industrial ecosystems, so it makes sense for an industry to have fewer and larger suppliers
    • much of the value was concentrated in design and customer relationship, activities the Western companies would retain

    What the companies failed to take into account was the speed at which Asian companies like WuXi, TSMC, Samsung, LG, CATL, Trina, Tongwei, and many others would consolidate (usually with government support), ultimately “graduating” into dominant positions with real market leverage and with the profitability to invest into the higher value activities that were previously the sole domain of Western industry.

    Now, scrambling to reposition themselves closer to the forefront in some of these critical industries, these governments have tried to kickstart domestic efforts, only to face the economic realities that led to the outsourcing to begin with.

    Northvolt, a major European effort to produce advanced batteries in Europe, is one example of this. Despite raising tremendous private capital and securing European government support, the company filed for bankruptcy a few days ago.

    While much hand-wringing is happening in climate-tech circles, I take a different view: this should really not come as a surprise. Battery manufacturing (like semiconductor, solar, pharmaceutical, etc) requires huge amounts of capital and painstaking trial-and-error to perfect operations, just to produce products that are steadily dropping in price over the long-term. It’s fundamentally a difficult and not-very-rewarding endeavor. And it’s for that reason that the West “gave up” on these years ago.

    But if US and European industrial policy is to be taken seriously here, the respective governments need to internalize that reality and be committed for the long haul. The idea that what these Asian companies are doing is “easily replicated” is simply not true, and the question is not if but when will the next recipient of government support fall into dire straits.

    From the start, Northvolt set out to build something unprecedented. It didn’t just promise to build batteries in Europe, but to create an entire battery ecosystem, from scratch, in a matter of years. It would build the region’s biggest battery factories, develop and source its own materials, and recycle its own batteries. And, with some help from government subsidies, it would do so while matching prices from Asian manufacturers that had dominated global markets.

    Northvolt’s ambitious attempt to compress decades of industry development into just eight years culminated last week, with its filing for Chapter 11 bankruptcy protection and the departure of several top executives, including CEO Peter Carlsson. The company’s downfall is a setback for Europe’s battery ambitions — as well as a signal of how challenging it is for the West to challenge Chinese dominance.

    What Northvolt’s bankruptcy means for Europe’s battery ambitions
    Maeve Allsup | Latitude Media

  • Why Intel has to make its foundry business work

    Historically, Intel has (1) designed and (2) manufactured its chips that it sells (primarily into computer and server systems). It prided itself on having the most advanced (1) designs and (2) manufacturing technology, keeping both close to its chest.

    In the late 90s/00s, semiconductor companies increasingly embraced the “fabless model”, whereby they would only do the (1) design while outsourcing the manufacturing to foundries like TSMC. This made it much easier and less expensive to build up a burgeoning chip business and is the secret to the success of semiconductor giants like NVIDIA and Qualcomm.

    Companies like Intel scoffed at this, arguing that the combination of (1) design and (2) manufacturing gave their products an advantage, one that they used to achieve a dominant position in the computing chip segment. And, it’s an argument which underpins why they have never made a significant effort in becoming a contract manufacturer — after all, if part of your technological magic is the (2) manufacturing, why give it to anyone else?

    The success of TSMC has brought a lot of questions about Intel’s advantage in manufacturing and, given recent announcements by Intel and the US’s CHIPS Act, a renewed focus on actually becoming a contract manufacturer to the world’s leading chip designers.

    While much of the attention has been paid to the manufacturing prowess rivalry and the geopolitical reasons behind this, I think the real reason Intel has to make the foundry business work is simple: their biggest customers are all becoming chip designers.

    While a lot of laptops and desktops and servers are still sold in the traditional fashion, the reality is more and more of the server market is being dominated by a handful of hyperscale data center operators like Amazon, Google, Meta/Facebook, and Microsoft, companies that have historically been able to obtain the best prices from Intel because of their volume. But, in recent years, in the chase for better and better performance and cost and power consumption, they have begun designing their own chips adapted to their own systems (as this latest Google announcement for Google’s own ARM-based server chips shows).

    Are these chips as good as Intel’s across every dimension? Almost certainly not. It’s hard to overtake a company like Intel’s decades of design prowess and market insight. But, they don’t have to be. They only have to be better at the specific use case Google / Microsoft / Amazon / etc need it to be for.

    And, in that regard, that leaves Intel with really only one option: it has to make the foundry business work, or it risks losing not just the revenue from (1) designing a data center chip, but from the (2) manufacturing as well.

    Axion processors combine Google’s silicon expertise with Arm’s highest performing CPU cores to deliver instances with up to 30% better performance than the fastest general-purpose Arm-based instances available in the cloud today, up to 50% better performance and up to 60% better energy-efficiency than comparable current-generation x86-based instances1. That’s why we’ve already started deploying Google services like BigTable, Spanner, BigQuery, Blobstore, Pub/Sub, Google Earth Engine, and the YouTube Ads platform on current generation Arm-based servers and plan to deploy and scale these services and more on Axion soon.

    Introducing Google Axion Processors, our new Arm-based CPUs
    Amin Vahdat | Google Blog

  • How packaging tech is changing how we build & design chips

    Once upon a time, the hottest thing in chip design was “system-on-a-chip” (SOC). The idea is that you’d get the best cost and performance out of a chip by combining more parts into one piece of silicon. This would result in smaller area (less silicon = less cost) and faster performance (closer parts = faster communication) and resulted in more and more chips integrating more and more things.

    While the laws of physics haven’t reversed any of the above, the cost of designing chips that integrate more and more components has gone up sharply. Worse, different types of parts (like on-chip memory and physical/analog componentry) don’t scale down as well as pure logic transistors, making it very difficult to design chips that combine all these pieces.

    The rise of new types of packaging technologies, like Intel’s Foveros, Intel’s EMIB, TSMC’s InFO, new ways of separating power delivery from data delivery (backside power delivery), and more, has also made it so that you can more tightly integrate different pieces of silicon and improve their performance and size/cost.

    The result is now that many of the most advanced silicon today is built as packages of chiplets rather than as massive SOC projects: a change that has happened over a fairly short period of time.

    This interview with IMEC (a semiconductor industry research center)’s head of logic technologies breaks this out…

    What we’re doing in CMOS 2.0 is pushing that idea further, with much finer-grained disintegration of functions and stacking of many more dies. A first sign of CMOS 2.0 is the imminent arrival of backside-power-delivery networks. On chips today, all interconnects—both those carrying data and those delivering power—are on the front side of the silicon [above the transistors]. Those two types of interconnect have different functions and different requirements, but they have had to exist in a compromise until now. Backside power moves the power-delivery interconnects to beneath the silicon, essentially turning the die into an active transistor layer which is sandwiched between two interconnect stacks, each stack having a different functionality.

    What is CMOS 2.0?
    Samuel K. Moore | IEEE Spectrum

  • The Opportunity in Lagging Edge Semiconductors

    While much attention is (rightly) focused on the role of TSMC (and its rivals Samsung and Intel) in “leading edge” semiconductor technology, the opportunity at the so-called “lagging edge” — older semiconductor process technologies which continue to be used — is oftentimes completely ignored.

    The reality of the foundry model is that fab capacity is expensive to build and so the bulk of the profit made on a given process technology investment is when it’s years old. This is a natural consequence of three things:

    1. Very few semiconductor designers have the R&D budget or the need to be early adopters of the most advanced technologies. (That is primarily relegated to the sexiest advanced CPUs, FPGAs, and GPUs, but ignores the huge bulk of the rest of the semiconductor market)
    2. Because only a small handful of foundries can supply “leading edge” technologies and because new technologies have a “yield ramp” (where the technology goes from low yield to higher as the foundry gets more experience), new process technologies are meaningfully more expensive.
    3. Some products have extremely long lives and need to be supported for decade-plus (i.e. automotive, industrial, and military immediately come to mind)

    As a result, it was very rational for GlobalFoundries (formerly AMD’s in-house fab) to abandon producing advanced semiconductor technologies in 2018 to focus on building a profitable business at the lagging edge. Foundries like UMC and SMIC have largely made the same choice.

    This means giving up on some opportunities (those that require newer technologies) — as GlobalFoundries is finding recently in areas like communications and data center — but provided you have the service capability and capacity, can still lead to not only a profitable outcome, but one which is still incredibly important to the increasingly strategic semiconductor space.

    When GlobalFoundries abandoned development of its 7 nm-class process technology in 2018 and refocused on specialty process technologies, it ceased pathfinding, research, and development of all technologies related to bleeding-edge sub-10nm nodes. At the time, this was the correct (and arguably only) move for the company, which was bleeding money and trailing behind both TSMC and Samsung in the bleeding-edge node race. But in the competitive fab market, that trade-off for reduced investment was going to eventually have consequences further down the road, and it looks like those consequences are finally starting to impact the company. In a recent earnings call, GlobalFoundries disclosed that some of the company’s clients are leaving for other foundries, as they adopt sub-10nm technologies faster than GlobalFoundries expected.

    GlobalFoundries: Clients Are Migrating to Sub-10nm Faster Than Expected
    Anton Shilov | Anandtech

  • I want your market and you to pay for it

    I have followed TSMC very closely since I started my career in the semiconductor industry. A brilliant combination of bold business bet (by founder Morris Chang), industry tailwinds (with the rise of fabless semiconductor model), forward-thinking from the Taiwanese government (who helped launch TSMC), and technological progress, it’s been fascinating to see the company enter the public consciousness.

    In hearing about TSMC’s investment in the very aptly-named ESMC (European Semiconductor Manufacturing Company), I can’t help but think this is another brilliant TSMC-esque play. TSMC gets:

    • Guarantee outsized market share in leading edge semiconductor technology in Europe
    • Paid for in part by some of their largest customers (Infineon, Bosch, and NXP) who will likely commit / guarantee some of their volumes to fill this new manufacturing facility
    • AND (likely) additional subsidies / policy support from the European Union government (who increasingly doesn’t want to be left out of advanced chip manufacturing given Asia’s current dominance and the US’s Inflation Reduction Act push)

    TSMC has managed to turn what could have been a disaster for them (growing nationalism in semiconductor manufacturing) into a subsidized, volume-committed factory.

    TSMC, in collaboration with Bosch, Infineon and NXP, is planning to invest in the European Semiconductor Manufacturing Company (ESMC), based in Dresden, Germany. This strategic move aims to meet the burgeoning demand for advanced semiconductor-manufacturing services, particularly in the automotive and industrial sectors.

    Driving Europe’s Chip Renaissance: TSMC’s Vision with ESMC
    Maurizio di Paolo Emilio | EETimes

  • Made in Taiwan

    I’ve been on my current consulting case for about 3 months. It is a strategy case for a technology client. As a result, I’ve been able to do a great deal of work researching various technology markets and trends, ranging from the typical (Internet search) to the more esoteric (grid computing), as I help the client scope out possible expansion opportunities.

    During the course of this research, I have been surprised by many aspects of the technology value chain I did not appreciate before, but what I found most surprising on a personal level was how important Taiwan is to the global technology market.

    This is a particular point of pride for me, for despite Taiwan’s pre-eminence as an economic power and it’s fascinating fusion of Western, Japanese, and Chinese influences, the island is not given the same respect or attention as Hong Kong or Singapore. Despite a vibrant political system, it has no seat on the United Nations, no diplomatic recognition by any major country, and even to the United States which guards the island as if it were its own, it is the black sheep of the US’s circle of friends.

    And yet, the world as you or I know it would not be able to get along without it:

    1. Taiwan is the center of the world’s semiconductor foundry business. Because cutting-edge semiconductor factories (called fabs) are so expensive to manufacture, only the largest semiconductor firms (such as Samsung and Intel) have the annual sales numbers to justify building their own factories. Smaller players are better off outsourcing their production capacity to dedicated semiconductor factories, called foundries. Today, almost all semiconductor manufacturers use the services of a foundry to build most if not all of their semiconductors. The world’s two largest foundries, TSMC (Taiwan Semiconductor) and UMC (United Microelectronics) are located in Taiwan, and together control approximately 60% of the world foundry business (the next largest foundry is only half the size of UMC, which is itself only about one third the size of TSMC!) and exert significant influence in the global semiconductor industry.
    2. Taiwan is the center of the world’s electronics manufacturing services. What many people don’t realize is that companies like Apple and Dell tend to only specialize in marketing and some design, but not in manufacturing (which would involve building a factory, gaining manufacturing expertise and skill, and other expensive and difficult things for a firm trying to stay lean and on the cutting edge). These firms thus outsource their manufacturing to specialized firms called Electronic Manufacturing Services (EMS) firms. The world’s largest EMS company by far is the Foxconn/Hon Hai conglomerate which is responsible for about 20% of the world’s outsourced electronics manufacturing, almost double that of the second largest firm. Never heard of them? You’ve certainly heard of its products: the MacBook Pro, the iPhone, the iPod, the Playstation 3, the Wii, the Xbox 360, graphics cards for AMD/ATI and NVIDIA, … the list goes on.
    3. Taiwan is the world’s original design manufacturing capital. Original design manufacturers (ODMs) go a step further than EMS firms — they actually do provide some of their own design services (which begs the question of what we’re paying Dell and HP and Apple for when they’re outsourcing design to ODMs). This is one reason that many ODMs are also original electronics manufacturers (OEMs) — companies which attach brands to the electronics themselves (think Apple, Lenovo, Dell, etc.) Of the top 10 ODMs in the world in 2006, at least 9 are Taiwanese companies (and that’s because I was too lazy to look up the last one — TPV technology) — those firms alone control nearly 70% of the global ODM market — and they include Windows Mobile phone manufacturer and Open Handset Alliance member HTC and the rapidly growing computer OEM ASUS.
    4. Taiwan is also home to D-Link and Acer. The latter of which recently is trying to resurrect dying brands of eMachines and Gateway.

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