TSMC Plans 300mm Fab Amid China's Policy to Foster Own Chip Sector

Silicon foundry giant Taiwan Semiconductor Manufacturing Co. (TSMC) plans to open its first 300mm wafer fab in China, responding to the nation's recent announcement to budget massively to foster its homegrown semiconductor industry.

China, a major semiconductor market that depended on imports to meet US$232.2 billion in semiconductor demand in 2013, plans to cultivate its semiconductor industry by investing RMB120 billion (US$19.6 billion) initially.

TSMC Chairman Morris Chang recently said the company's decision to open a 300mm wafer fab in China hinges on its national  industry policy, conceding that TSMC has little choice if China will only use chips made locally.

Chang added that TSMC is but a catalyst in China's semiconductor industry growth and plans to set up 28nm process capacity that accounts for sub-10% of its total capacity there.

TSMC's spokespeople said the investment plan is still on the drawing board without having budgeted for such capital expenditure for 2015.

Industry executives say although TSMC is running a 200mm wafer fab in China, 28nm process is a manufacturing technology used in 300mm wafer fab.

Capital equipment suppliers predict TSMC to open such a facility in China by 2016 for the Taiwan government only permits the island's chipmakers to invest in wafer fabs in China that is two generations behind their latest technologies in Taiwan. TSMC will ramp up volume production using 16nm process in 2016 after beginning volume production in H2, 2015.

Industry executives say TSMC may still choose Shanghai as the location for its 300mm wafer fab because its 200mm fab is in the same city, where semiconductor industrial clusters have developed.

They also reiterated Chairman Chang's statement above, emphasizing that for TSMC to overlook such opportunity would result in losing the huge market to Samsung and Intel.

Taiwan supplied 31% of China's imports of IC chips in 2013, which were mostly built by TSMC. .

Samsung opened a 300mm wafer fab in Xian in China to put out memory chips before the policy announcement, and can put aside the facility for production of logic chips, the major products that TSMC is contracted to make in line with China's policy.

China's homegrown Semiconductor Manufacturing International Corp. (SMIC) also  competes against TSMC with vigorous effort to migrate to 28nm process.

China's semiconductor market has grown rapidly over the last few years, mostly driven by government subsidies for IC design houses striving to develop chips for trendy applications such as Internet of Things (IoT) and wearable gear, to create demand for sufficient, advanced foundry capacity from contract chipmakers.

Industry executives say TSMC can comfortably meet such demand  with its high-yield 28nm process since it has migrated to 16nm process technology for high-end customers like Broadcom, Qualcomm and Apple.

Global Unichip Corp. can also help TSMC's to lure contracts from China's design houses, providing intellectual property to application specialty IC (ASIC) designers developing system-on-chips.

The major hurdle to TSMC's  investment plan in China is the Taiwan government, which stipulates the island's chipmakers can set up production capacity in China only through taking over plants or acquiring stocks, not building new factory.

United Microelectronics Corp. (UMC), another major foundry supplier in Taiwan to invest in 300mm fab in China, plans to acquire stocks in a chip-making venture co-founded by the Xiamen City Government and Fujian Electronics and Information (Group) Co., Ltd. (KL)

Prominent 300mm Wafer Fabs in China

Company	Location	Product	Monthly Capacity
UMC	Xiamen	Contract logic ICs	56,000 wafers
SIMC	Beijing, Wuhan	Contract logic ICs at Beijing and contract NOR flash ICs at Wuhan	50,000 wafers at Beijing and 60,000 wafers at Wuhan
Intel	Dalian	CPUs	52,000 wafers
Samsung	Xian	Storage flash memory chips	100,000 wafers
SK Hynix	Wuxi	DRAM	130,000 wafers

Source: The companies