TSMC mass-produces next-gen chips seeking to safeguard global lead

Taiwan Semiconductor Manufacturing Co. kicked off mass production of 3-nanometer chips, seeking to keep its place as the dominant supplier of the world’s most advanced semiconductors.

TSMC joins Samsung Electronics Co. in kickstarting production of a technology that’s expected to control the next lineup of cutting-edge devices from iPhones to internet servers.

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The rollout of the high-performance chips on Thursday in Tainan, southern Taiwan, follows the company’s announcement that it will offer 4nm chips at a new Arizona plant from 2024 and 3nm chips at a second US plant in 2026. TSMC, the primary chipmaker for Apple Inc., is also ramping up capacity in Japan and exploring sites in countries such as Germany.

Demand for the 3nm chips is “very strong,” TSMC Chairman Mark Liu said, adding that the company will build 2nm plants in Taiwan’s Hsinchu and Taichung.

TSMC is moving into the next generation of chipmaking just as demand for electronics craters, hurt by the threat of a global recession and uncertainty over the impact of US sanctions on China’s economy. TSMC this year reduced its capital spending plans by at least 10 percent to $36 billion, and some analysts warn it may further delay expenditure on expansion in 2023.

Chips carrying transistors with smaller line widths are generally more capable and power-efficient. TSMC said its 3nm processes offer better performance than its 5nm chips, while requiring about 35 percent less power. The 3nm technology will create end products with a market value of $1.5 trillion within five years, Liu said.

“The semiconductor industry will grow rapidly over the next decade, and Taiwan will surely play an even more critical role in the global economy,” he said.

Taiwan is home to more than 90 percent of the manufacturing capacity for the world’s leading-edge chips. Global policy makers and customers are increasingly leery of their technological reliance on an island Beijing has threatened to invade, and have pushed TSMC to shift some production abroad.

TSMC’s recent move to diversify production overseas has raised alarms in Taiwan that this would undermine the island’s strategic importance over the long term. Taiwanese President Tsai Ing-wen said earlier this week that moves by TSMC to build factories overseas is a sign of Taiwan’s power abroad, rather than a threat to local industry. Taiwan’s officials have said that the island’s firms will continue to keep the most advanced chipmaking technology at home.

Samsung began mass production of 3nm semiconductors in June in an uphill bid to catch up to TSMC in the contract chipmaking business and meet growing demand for high-performance devices that consume less power.

China claims Taiwan as part of its territory and regularly threatens to invade to prevent its formal independence. Recent military exercises have reignited concerns about the world’s dependence on Taiwan for semiconductors.

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