What does TSMC do? How TSMC Makes Money？

Taiwan Semiconductor Manufacturing Company (TSMC) introduction

Founded in 1987 in Hsinchu Science Park, TSMC pioneered the business model of dedicated integrated circuit (IC) manufacturing services.

TSMC focuses on producing chips designed by customers, without designing, producing, or selling its own branded products, ensuring no competition with its clients.

The key to TSMC’s success lies in helping its customers achieve success. The company’s professional IC manufacturing services have led to the rise of the global fabless IC design industry.

Today, TSMC is the largest dedicated IC manufacturing service company in the world, producing 17,761 different products for 499 customers using 272 process technologies in 2019.

Company Overview

1. History and Background

Taiwan Semiconductor Manufacturing Company (TSMC) was established on February 21, 1987, and is the world’s largest dedicated integrated circuit (IC) manufacturing services company. Its business strategy focuses solely on providing professional IC manufacturing services to customers, without designing, producing, or selling its own branded products, thus avoiding competition with customers.

The company pioneered the establishment of an information platform called the Virtual Fab, which provides a complete range of services, allowing customers to track order progress across the entire supply chain from the wafer fab to packaging and testing facilities.

TSMC was listed on September 5, 1994, and its American Depositary Receipts (ADRs) were listed on the NYSE on October 8, 1997, under the ticker symbol TSM.

On July 28, 2023, the company launched its global R&D center in Baoshan, Hsinchu Science Park.

2. Business Scope and Product Structure

The scope of business covers IC manufacturing services and related projects, including wafer manufacturing, mask production, wafer testing, and lead-tin bump packaging and testing support services.

In Q1 2024, the process technology revenue breakdown was 5nm (37%), 7nm (19%), 16nm (9%), 28nm (8%), 40/45nm (5%), 65nm (4%), 90nm (1%), 0.11/0.13 microns (3%), 0.15/0.18 microns (4%), 0.25 microns and above (1%), and 3nm (9%). The technology platform breakdown was high-performance computing (46%), smartphones (38%), IoT (6%), automotive electronics (6%), consumer electronics (2%), and others (2%).

Product Image:

Image Source: Company Website

Products and Competitive Conditions

1. Product and Technology Overview

TSMC is a leader in both technology and capacity, being the first foundry to achieve volume production of technologies below 40nm. Its 40nm technology has superior scale and yield compared to competitors, holding 80-90% of the global market share, while the production timelines for 28nm and 20nm processes are at least three quarters ahead of the competition.

(1) Process Technologies

• 2nm (N2) technology
• 3nm Fin Field-Effect Transistor (FinFET) technology (N3)
• Enhanced N3 technology (N3E)
• 4nm FinFET technology (N4)
• 4nm FinFET Plus technology (N4P)
• N4X process technology
• 5nm FinFET Plus technology (N5P)
• 6nm FinFET technology (N6)
• 7nm FinFET (N7) and 7nm FinFET Plus (N7+) technology
• N12e™ technology based on 12nm FinFET Compact Plus (12FFC+)
• 22nm Ultra-Low Leakage (ULL) technology (22ULL)

(2) Specialty Process Technologies

• 5nm FinFET Automotive (N5A) technology
• N6 Radio Frequency (RF) technology (N6 RF)
• 12FFC+ RF Technology 1.0 for Integrated Circuit Simulation Program (SPICE)
• 16nm FinFET Compact (16FFC)
• 16FFC Embedded Magnetoresistive Random Access Memory (MRAM)
• 22ULL and 28nm ULL Embedded Resistive Random Access Memory (RRAM)
• 12-inch wafer 40nm Silicon On Insulator (SOI) (N40SOI)
• 6-inch GaN on Silicon substrate
• Continuous improvements in CMOS Image Sensor (CIS) technology
• COUPE (COmpact Universal Photonics Engine) 3D photonic stacking technology

(3) TSMC 3DFabric™

• TSMC-SoIC® (System on Integrated Chip)
• TSMC-SoIC® Wafer on Wafer (WoW)
• CoWoS®-S (Chip on Wafer on Substrate with Silicon Interposer)
• CoWoS®-R (Chip on Wafer on Substrate with Redistribution Layer Interposer)
• Integrated Fan-Out on Substrate (InFO on Substrate, InFO_oS)
• Integrated Fan-Out with Local Si Interconnect (InFO_LSI)
• Fine-pitch array copper bumps

2. Key Raw Materials

The raw materials required for the company’s products include silicon wafers, chemical materials for processing, photolithography materials, gases, as well as polishing slurries, polishing pads, and diamond blades.

3. Major Production Sites

Size	Plant	Production Site
12-inch Fab	Fab 12A	Hsinchu Science Park
	Fab 12B	Hsinchu Science Park
	Fab 14	Tainan Science Park
	Fab 15	Taichung Science Park
	Fab 16	Nanjing, Jiangsu
	Fab 18	Tainan Science Park
	Fab 20	Hsinchu Science Park (Expected production in 2025)
	Fab 21	Arizona, USA (Expected production in 2025)
	Fab 22	Nanzih, Kaohsiung (Expected completion in 2025)
	Fab 23	Kumamoto, Japan (Expected production by the end of 2024)
	ESMC	Dresden, Germany (Expected production in 2027)
8-inch Fab	Fab 3	Hsinchu Science Park
	Fab 5	Hsinchu Science Park
	Fab 6	Tainan Science Park
	Fab 8	Hsinchu Science Park
	Fab 10	Songjiang District, Shanghai
	Fab 11	Washington, USA
6-inch Fab	Fab 2	Hsinchu Science Park
Back-end Packaging	Advanced Packaging Plant 1	Hsinchu Science Park
	Advanced Packaging Plant 2	Tainan Science Park
	Advanced Packaging Plant 3	Longtan, Taoyuan
	Advanced Packaging Plant 5	Taichung Science Park
	Advanced Packaging Plant 6	Zhunan, Miaoli
	Advanced Packaging Plant 7	Chiayi Science Park (Expected completion in 2026, production in 2028)

In May 2020, the company announced it would establish a factory in Arizona, USA, with a total investment of $40 billion, primarily to produce 5nm process technology semiconductor chips, with construction starting in 2021 and expected production in 2025. The second phase is expected to begin production of 3nm processes in 2026.

In November 2021, the company announced a partnership with Sony Semiconductor Solutions Corporation to build a wafer fab in Kumamoto, Japan, called Japan Advanced Semiconductor Manufacturing (JASM), with Sony investing approximately $500 million for less than 20% equity. In February 2022, DENSO invested $350 million for over 10% equity in JASM. The capital expenditure for the Kumamoto plant was increased from the original $7 billion to $8.6 billion, providing 22/28nm and 12/16nm FinFET processes, with construction beginning in April 2022 and expected production by the end of 2024. The company plans to build a second factory in Kikyū Town, Kumamoto Prefecture, with a total investment of about ¥1 trillion, aimed at producing 12nm chips, expected to start production by the end of 2027.

In November 2021, the company decided to establish a factory in Kaohsiung to produce 7nm and 28nm process wafers. In October 2022, the capacity planning was adjusted to prioritize 28nm production, and in July 2023, it was changed to a 2nm plant, expected to begin production in 2025.

In August 2023, the company announced a joint venture with Infineon, NXP, and Bosch to establish a European semiconductor manufacturing company (ESMC) and build a 12-inch wafer fab in Dresden, Germany, focusing on 28nm automotive-related chip production, with expected production by the end of 2027.

Market Sales and Competition

1. Sales Performance

The company primarily serves customers who are fabless design companies and integrated device manufacturers, including AMD, Amazon, Broadcom, Intel, MediaTek, NVIDIA, NXP Semiconductors, Qualcomm, Renesas Electronics, Sony Semiconductor Solutions, and STMicroelectronics.

2. Domestic and International Competitors

Competitors in the foundry business include UMC, GlobalFoundries, Powerchip, SMIC, Hua Hong Semiconductor, Samsung Electronics, Tower Semiconductor, and Dongbu HiTek.

TSMC’s Vision

To become the most advanced and largest provider of professional integrated circuit technology and manufacturing services globally, working together with our fabless design companies and integrated device manufacturers to form a strong competitive team in the semiconductor industry.

TSMC’s Mission

To be a long-term and trusted provider of technology and capacity in the global logic integrated circuit industry.

TSMC Core Corporate Values

• Integrity: This is our fundamental and most important principle. We speak the truth; we do not exaggerate or show off. We do not make promises lightly to customers, and once a commitment is made, we will do everything possible to fulfill it. We compete vigorously within legal boundaries, respect the intellectual property rights of our peers, and select and cooperate with suppliers objectively, fairly, and transparently. Internally, we will not tolerate corruption, factionalism, or “company politics.” The primary criteria for hiring are character and ability, not “connections.”
• Commitment: TSMC is dedicated to its commitments to customers, suppliers, employees, shareholders, and society. The interests of all stakeholders are equally important to TSMC, and we strive to safeguard their rights. We also hope that all stakeholders will uphold their commitments to TSMC.
• Innovation: Innovation is the source of our growth. We pursue comprehensive innovation that encompasses strategy, marketing, management, technology, and manufacturing. Innovation requires not only new ideas but also execution to create change; otherwise, it remains mere speculation without benefit.
• Customer Trust: Customers are our partners, and we prioritize their needs. We view our customers’ competitiveness as TSMC’s competitiveness, and their success is our success. We strive to establish deep partnerships with customers and become their trusted long-term partners for success.

TSMC’s Differentiated Advantages

TSMC’s industry leadership is based on three differentiated competitive advantages: “advanced technology, excellent manufacturing, and customer trust,” along with outstanding business strategies. As a technology leader, TSMC has consistently been the first to introduce the latest generation of technology as a dedicated IC manufacturing service provider. Additionally, TSMC has also established a leading position in more mature process technologies, as it integrates its experience in advanced technology development into these more established specialty processes. Moreover, TSMC’s excellent integration capabilities for front-end and back-end processes provide competitive advantages in power consumption, performance, and chip size optimization, assisting customers in quickly entering production.

TSMC’s leading IC manufacturing management capabilities have been highly recognized, and the “Open Innovation Platform® Initiative” and TSMC Grand Alliance further enhance its leadership position. TSMC’s “Open Innovation Platform” accelerates innovation in the semiconductor design industry with its silicon intellectual property partners and strengthens the front-end process technology and back-end services. The “Open Innovation Platform” is a comprehensive design ecosystem that accelerates innovation across the supply chain through collaborative platforms developed and supported by TSMC, generating and sharing new revenues and profits. The TSMC Grand Alliance, consisting of TSMC’s customers, electronic design automation (EDA) partners, silicon intellectual property (IP) partners, and major equipment and material suppliers, represents one of the strongest innovative forces in the semiconductor industry. Through this novel and higher-level collaboration, we aim to help customers, alliance members, and TSMC seize business opportunities and strengthen competitive advantages.

Since its establishment in 1987, TSMC has consistently upheld its commitment to “never compete with customers,” which forms the foundation of customer trust in TSMC. Because of this, TSMC has never developed or marketed any proprietary chip products but instead invests all resources to become a trusted professional IC manufacturing service provider for its customers.