Anxiety of TSMC 3nm

At the end of 2022, TSMC announced the mass production of the 3nm process, but it was not until recently that the first 3nm chip manufactured by TSMC was officially released. However, this first 3nm is not part of TSMC's largest customer, Apple, but Marvell's data center chip.

After listening to the wind for so long, it's finally rain, but this does not mean that TSMC's 3nm technology can be perfectly mass-produced.

Previously, TSMC's 3nm node process faced doubts from aspects such as production capacity and yield. Multiple foreign media reports indicate that TSMC is currently making every effort to produce enough 3nm chips to meet Apple's demand, but it is still unable to meet the order quantity requirements. Moreover, the yield rate of TSMC's 3nm chip production is only 55%, which still cannot meet Apple's needs

Faced with the above situation, analysts from different institutions told EE Times that TSMC's true 3nm technology can only expand after the more advanced EUV device NXE: 3800E is launched.

The following is the original text 'TSMC's 3-nm Push Faces Tool Struggles'.

TSMC is working hard to meet the top customer Apple's demand for 3nm chips. According to analysts interviewed by EE Times, the company's difficulties in tools and production have hindered its pace of mass production with world leading technologies.

TSMC and its biggest competitor in the OEM business, Samsung, are competing to produce 3nm products for high-performance computing (HPC) and smartphones for customers such as Apple and Nvidia. Moreover, TSMC became the latest company to claim leadership in 3nm technology in last week's quarterly performance announcement.

Our 3nm technology is the first in the semiconductor industry to be able to produce in large quantities with good yield, "TSMC CEO Wei Zhejia said in a conference call with analysts, Due to our customers' demand for N3 (the term TSMC 3nm) exceeding our supply capacity, we expect N3 to receive comprehensive support from HPC and smartphone applications in 2023. A significant contribution to N3 revenue is expected to begin in the third quarter, and in 2023, N3 will account for a single digit percentage of our total wafer revenue

TSMC, Samsung, and Intel are targeting technology leadership to serve CPU design vendors including Apple, NVIDIA, and others. The ultimate leader will gain the largest profit share in the OEM business, which has grown faster than the entire semiconductor industry for decades. Mehdi Hosseini, an analyst at Susquehanna International Group, said that TSMC still holds the top spot.

The trick of outsourcing factories is to enable extremely expensive production tools from multiple suppliers to operate together with maximum efficiency.

Hosseini stated in a report he provided to EE Times, "In our view, TSMC remains the preferred foundry for advanced nodes because Samsung has not yet demonstrated stable advanced process technology, and IFS (Intel OEM Services) is still a few years away from providing competitive solutions

01

The yield at 3nm is only 55%

EUV devices waiting for updates

Hosseini stated that in the second half of 2023, TSMC will produce Apple's A17 and M3 processors at N3 nodes, as well as ASIC based server CPUs at N4 and N3 nodes. Moreover, TSMC will also manufacture Intel's Meteor Lake graphics chips at N5 nodes, AMD's Genoa and Nvidia's Grace processors at N5 and N4 nodes, and Nvidia's H100 GPU at N5 nodes.

Brett Simpson, a senior analyst at Arete Research, stated in a report provided to EE Times that Apple will only pay TSMC for known qualified chips, rather than standard wafer prices, at least in the first three to four quarters of N3 and before the yield rises to around 70%.

We believe that TSMC will work with Apple to implement normal wafer based pricing for N3 in the first half of 2024, with an average selling price of approximately $16000-17000, "Simpson said." Currently, we believe that TSMC's N3 yield for A17 and M3 processors is around 55% (a healthy level at this stage of N3 development), and TSMC appears to be increasing yield by more than 5 points per quarter as planned

The Arete report states that for the iPhone A17 chip, TSMC will make 82 mask layers, and the chip size may range from 100 to 110 millimeters. The report adds that this means that the production of each wafer is approximately 620 chips, with a wafer cycle of four months. The chip size of M3 may be around 135-150 millimeters, with a production capacity of approximately 450 chips per wafer.

Simpson stated that TSMC's current focus is to optimize production and wafer cycle time through this early improvement to drive efficiency.

Hosseini said that TSMC delayed the launch and mass production of 3nm due to the need to use ASML's EUV lithography technology for multiple exposure, "Although the high cost of EUV multiple exposure makes the cost/benefit of EUV unattractive, relaxing the design rules and reducing the number of exposures will lead to an increase in the size of bare crystals. He added that before the EUV NXE: 3800E of ASML with higher throughput is launched in the second half of 2023, the" real "3nm node will not be able to expand.

According to Hosseini, NXE: 3800E will help to increase wafer production, which is about 30% higher than the current NXE: 3600D, and reduce the overall cost of EUV multiple exposure.

Hosseini stated in the report that TSMC will accelerate the adoption of NXE: 3800E in the first half of 2024, as foundries provide N3E technology and other variants of 3nm nodes to more customers.

TSMC is obtaining assistance with lithography technology from customer Nvidia.

Wei Zhejia stated that "cuLitho" software and hardware are transferring expensive operations to Nvidia GPUs, which will help TSMC deploy reverse lithography technology and deeper learning.

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Expected performance decline in 2023

But it's even harder for other OEM factories

TSMC expects its next node, N2, to begin production in 2025.

At N2, we have observed high customer interest and engagement, "Wei Zhejia said." Our 2nm technology will be the most advanced semiconductor technology in the industry in terms of density and energy efficiency when launched, and will further expand our technology leadership position in the future

TSMC stated that the revised level of chip inventory that has swept the entire industry has exceeded TSMC's expectations three months ago and may continue into the third quarter of this year. Therefore, TSMC now predicts that its revenue in 2023 may experience its first decline in nearly a decade, and its sales may decline by a single digit percentage.

Simpson said, "We believe that for other OEM companies, sales in 2023 may decline more than TSMC, and a sluggish recovery in the second half of the year is the norm

Despite the economic downturn, TSMC still adheres to the same capital expenditure budget as last year, ranging from approximately $32 billion to $36 billion. Due to a decrease in equipment utilization, TSMC hopes for a rebound in its business in the third quarter.

Capacity utilization is a key indicator of profitability.

We expect mixed utilization to reach a low point of approximately 66% in the second quarter of 2023, with N7 utilization below 50%, "Hosseini said." We expect utilization to rebound in the second half of 2023, driven by new product upgrades