TSMC Continuing to Make Bold Investment
Taiwanese newspaper DigiTimes reported that it is impossible for Samsung Electronics to catch up with TSMC within 10 years from now. At present, Samsung Electronics is aiming to take the lion’s share in the global system-on-chip market by overtaking TSMC in 2030 or earlier. The newspaper asserted that it would be impossible.
According to it, TSMC’s overwhelming competitiveness is based on its bold investment. TSMC’s capex-to-sales ratio was 30 percent or so in 2015 to 2018 and exceeded 40 percent in 2019 and last year. This year, the company is going to invest US$28 billion in its facilities and equipment. For reference, the investment was US$17.2 billion last year and the scheduled investment is equivalent to 60 percent of the company’s 2020 sales.
In addition, TSMC is in possession of half of EUV lithography equipment currently in operation worldwide, while accounting for 70 percent of the global chip production based on EUV lithography. “TSMC is planning to invest more than US$100 billion for three years to come and its capex is going to exceed 50 percent of its annual sales in that period,” the newspaper explained.
TSMC is investing a lot in R&D, too. Specifically, its R&D investment-to-sales ratio has been over 8 percent for long. Although this ratio is not much different from that of Samsung Electronics, the investment efficiency of the former is much higher in that its investment is made only in the foundry sector.
TSMC initiated the mass production of 7-nm products in 2018 and 5-nm products in 2020. In addition, its 3-nm product manufacturing is scheduled to start in the second half of next year. In the second quarter of this year, 7-nm and 5-nm products accounted for 31 percent and 18 percent of its business performance, respectively. The company recently developed a 1-nm process technology based on 2D materials in cooperation with National Taiwan University and MIT. Meanwhile, Samsung Electronics is failing to improve its 5-nm product yield.
“When it comes to worldwide profits derived from 7-nm and more advanced processes, TSMC’s current proportion is more than 80 percent, and Samsung Electronics’ foundry investment is unlikely to bear fruit,” it pointed out, adding, “Although it is said that Samsung Electronics may acquire NXP, Infineon, Renasas, or the like in order to turn the tables, the acquisition of Renasas is highly unlikely in view of the diplomatic tension between South Korea and Japan and the United States and Europe will not let such things happen, either.”
“In short, Samsung Electronics cannot beat TSMC within 10 years,” it went on to say, continuing, “Although Taiwan’s victory in the foundry industry may not be fatal to South Korea, the semiconductor business of Samsung and the industry of South Korea may gradually go down if TSMC remains ahead of it in the foundry sector and Micron Technology, YMTC and others increasingly threaten its presence in the memory chip industry.”