Samsung Expected to Hike Investment at U.S. Foundry
The author is an analyst of NH Investment & Securities. He can be reached at hwdoh@nhqv.com. -- Ed.
TSMC has announced that it will construct a 5nm fab in Arizona with a view to evading political risks from the US. Following this, Samsung Electronics (SEC) is also expected to hike investment at its US foundry. Attention should turn to the global semicon equipment makers and materials makers that are expected to receive related orders.
TSMC to build 5nm fab in Arizona
On May 15, TSMC announced plans to construct a 5nm fab in Arizona. Construction will begin in 2021, and chip production will commence in 2024. The production capacity for the new fab will stand at 20K wpm. TSMC plans to invest US$12bn in the project by 2029. This is the second time TSMC has built a fab in the US. The company currently has an 8-inch fab in Washington and design centers in Austin, Texas and San Jose, California. It will be the first time that TSMC has constructed a 12-inch fab in the US.
Protectionism has spread in the US of late. In particular, Trump has singled out TSMC, pressurizing the firm to build a new US fab. US clients, including Apple, Qualcomm, AMD, and NVIDIA, account for more than 60% of TSMC’s sales. We interpret the company’s construction plans as a step to evade political risk in the country where its largest customers are located.
SEC expected to hike US investment
Market interest is focused on whether TSMC’s major competitor Samsung Electronics (SEC) will also decide to build a US fab. SEC’s woes over supporting the US or China will likely be high. In our view, SEC will increase investment in the US. One of SEC’s main goals is to take the number-one spot in the system semiconductor market by 2030. To achieve this, it will be essential to secure US clients, such as Qualcomm and NVIDIA, leaders in the global semiconductor market. We expect SEC to expand investment in the US in order to check TSMC’s close relationship with its US customers.
As SEC already has two foundries in Austin, Texas, it should be easier for the firm to expand its US presence than TSMC, which needs to secure a new site in Arizona. We expect SEC to upgrade its Austin fab, which is currently running 14nm processes, using EUV lithography equipment. In the long term, SEC is likely to build at least two new fabs using idle space at the site.
TSMC and SEC’s expansion plans are likely to lead to increased orders at global semicon equipment makers, including AMAT, RAM Research, and ASML. In Korea, ENF Technology and other players are increasing their investment to supply materials to SEC’s Austin fab.