On Thursday, TSMC held a 3nm mass production and factory expansion ceremony. Its chairman Liu Deyin said at the ceremony that 3nm has been mass-produced and the market demand is very strong. However, the latest news comes out that TSMC’s first-generation N3 process only has one customer, and Apple , and the mass production is not large.
So, what is the status of TSMC’s 3nm mass production? If Apple is the only customer, why does TSMC announce mass production of the 3nm process in a high-profile manner?
TSMC’s 3nm mass production situation
According to Liu Deyin, the market demand for TSMC’s 3nm process is “very strong” and it is estimated that starting from the first year of mass production, its annual revenue will be greater than that of 5nm in the same period. At the same time, TSMC also stated that it is estimated that within 5 years, 3nm technology production capacity will release US$1.5 trillion in terminal product value around the world.
According to TSMC’s estimates, its 3nm process should be mass-produced and have many customers.
But contrary to expectations, according to DigiTimes reports, the production capacity of TSMC's first-generation N3 process is currently only monopolized by Apple. Moreover, current shipments are extremely low and will not climb slightly until the first half of next year.
In fact, according to the plan, TSMC’s 3nm process currently produces about 15,000 to 20,000 pieces per month, but the actual production capacity is only a few thousand pieces ordered by Apple. Even in the first half of next year, production capacity will only increase slightly and monthly production capacity will not be fully absorbed. As for customers, there are still no other definite orders yet. There may be but not too many. Apple will be the main customer.
Why do TSMC’s 3nm process customers have few orders?
First, the industry downturn has led to weakness in chip companies.
Since 2022, consumer demand for electronic products, especially computers and mobile phones, has begun to weaken due to rising interest rates, falling stock markets, and concerns about an economic recession. This has led to an oversupply of chips , and chip inventories are at their highest level in more than a decade, exacerbating the weakness of semiconductor companies.
For example, chip giants including: Qualcomm , Micron , ADM and other companies have experienced revenue that is lower than expected, and have begun to try to reduce chip shipments to solve the contradiction between supply and demand. In 2022, chip companies' order cuts, high inventories, and large-scale layoffs have become common situations. Among them, TSMC's top customer sharply reduced orders for 3nm chips in November.
Therefore, it is natural that TSMC has few customers and orders for its 3nm process.
Secondly, TSMC’s N3 process performance has been improved at a small cost but at a high cost.
According to reports, TSMC is investing in and building a 3nm factory with a total investment of NT$600 billion (approximately RMB 136 billion). And this is only the investment in the construction of the wafer factory. If technology research and development, talent compensation, equipment procurement, etc. are added, the cost will definitely double.
TSMC has paid so much, so naturally it has to consider returns. It shouldn’t be doing business at a loss. Therefore, TSMC’s foundry fees for 3nm wafers are not low. The price of a single chip has reached US$20,000, which is double the unit price of 7nm. This does not include the yield problem.
These costs will naturally be passed on to downstream chip manufacturers, and chip manufacturers must also cooperate with the design, so the investment also includes design costs, IP, EDA, equipment, etc. These costs add up and are not small.
In addition, according to Moore's Law , every 18 months, the number of transistors in a chip doubles in the same area, but the price remains unchanged. In other words, if the cost has increased so much, then according to "Moore's Law", the number of transistors should double, and the chip performance should double.
However, TSMC’s 3nm process chips have not been able to double the performance. Compared with TSMC's 5nm process , the cost of 3nm chips has increased by at least about 40%, but the transistor density has only increased by 56%, which is far from Moore's Law. The cost of
is so high, but the performance is not much different from the 4nm process. Chip manufacturers have naturally lost enthusiasm for 3nm chips.Therefore, TSMC’s 3nm only has orders from Apple for the time being, and it may be the N3E process that will be launched next year. If this is the case, why does TSMC announce the mass production of 3nm in a high-profile manner?
Why did TSMC announce mass production of 3nm in a high-profile manner?
In fact, in the past, TSMC rarely held large-scale activities in terms of mass production of advanced technologies. However, this time is different. TSMC chose to hold a public 3nm mass production ceremony, most likely to "show off its muscles."
Since 2022, Samsung and TSMC have been competing for 3nm, and Samsung's 3nm process has taken the lead in mass production in July. Not only that, there is also news that Samsung will receive orders from many customers such as Nvidia, Qualcomm, IBM, etc., and it is expected to start product supply as early as 2024.
In terms of time and customers, Samsung is ahead of TSMC. However, TSMC has been delaying 3nm mass production due to various reasons. Therefore, it has also caused many doubts in the outside world, including: yield rate, technical issues, etc.
It can be seen that the main reason why TSMC chose this time to announce the mass production of 3nm in a high-profile manner is to demonstrate its own technical strength. Liu Deyin already demonstrated this at the ceremony. He called 3nm "the most advanced technology in the world," perhaps to eliminate the noise of poor yield rates and technical problems.
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