hankyoreh

Cranes loom over the construction site for TSMC’s new 2nm chip production factory on the southern edge of Hsinchu Science Park in Taiwan on March 30. (Choi Hyun-june/The Hankyoreh)

Hsinchu Science Park is about 60 kilometers southwest of the Taiwanese capital Taipei. On March 30, around a dozen cranes could be seen busily at work at a vacant site on the park’s southern side.

This is where a new factory is being built by TSMC, or Taiwan Semiconductor Manufacturing Co. — the world’s biggest semiconductor foundry business.

The site measures around 550,000 square meters, or roughly 2.5 times the area of Seoul’s World Cup Stadium. An official at the construction site explained, “Construction began last year and is scheduled for completion next year.”

TSMC plans to use the four semiconductor production lines under construction here to start production in 2025 on state-of-the-art 2-nanometer semiconductors (1 nanometer equals one 1-billionth of a meter).

A similar scene could be witnessed at the southern end of Taiwan in Kaohsiung when the Hankyoreh visited on March 31. TSMC is building a new advanced semiconductor plant on the site of an oil refinery that stopped operating around a decade ago.

Six or seven cranes were at work among the round oil tanks, while large trucks could be seen going back and forth carrying wires and other materials.

“The refinery was a headache because of pollution, so the residents welcome seeing a state-of-the-art semiconductor factory going up on that site,” said resident Chang Shidun, 65.

TSMC’s semiconductor treatment facility in Longtan Science Park in Taiwan, pictured on March 30. TSMC has plans to build a 1-nanometer process fab in the vicinity of this facility. (Choi Hyun-june/The Hankyoreh)

TSMC’s bold investments aren’t restricted to Taiwan — the company is branching out throughout the world. It is building a new, 210,000-square-meter factory in Japan’s Kumamoto Prefecture with 476 billion yen in support, or around 40% of the total project costs. Production is set to begin in late 2024 for automobile semiconductors in the 12- to 28-nanometer range.

The company also recently dramatically increased its investments in Arizona, US. Last December, it announced plans to follow up the first factory, which begins production in 2024, by building a second factory to produce semiconductors in the three-nanometer range, with a scheduled operation date of 2026. It is investing a combined US$43.5 billion in the two plants.

The company has also reportedly begun exploring the construction of an automobile semiconductor factory in the German city of Dresden, along with investment discussions with India and Mexico.

TSMC founder Morris Chang previously predicted that the US would not succeed with its attempts to increase domestic semiconductor production, citing production costs and specialized workforce issues. The latest activities suggest the company’s stance has shifted considerably.

The bold expansions TSMC is pursuing with its simultaneous increases in domestic and global investment stand in contrast with the recent activities by Samsung Electronics. The Korean company has been focusing much more on domestic investment, with plans announced last month for the investment of 300 trillion won (US$228 billion) in the Gyeonggi Province city of Yongin over the next 20 years.

Observers are now watching closely to see the outcomes of these different paths by two major leaders in the global semiconductor industry.

With foundry business emerging as a major current in the industry, the gap between the two companies shows little sign of shrinking. TSMC’s foundry market share grew from 51.4% to 58.5% between 2018 and 2022, while Samsung’s remained stagnant at 15.8% over the same period.

Samsung’s performance has fluctuated sharply with memory semiconductor business conditions, while TSMC’s numbers have sustained consistent growth. In terms of operating profits, Samsung Semiconductor far exceeded TSMC as recently as 2018, earning 44.5 trillion won to the latter’s 14 trillion won. By 2022, the tables had turned, with TSMC earning 47.6 trillion won to Samsung’s 24 trillion won.

TSMC does not have its own brand. Its business involves producing semiconductors designed by the world’s most advanced IT companies, including Apple, Qualcomm and Nvidia. It conquered the planet by applying consignment production — Taiwan’s industry forte — to the semiconductor field.

In a 2021 annual report, TSMC wrote that it had “manufactured 12,302 different items for 535 clients using 291 different forms of technology this year.”

As a company with its own brand, Samsung faces an uphill battle drawing orders for its items from competitor companies such as Apple.

The big turning point in TSMC global growth came in 2020, as the strategic rivalry between the US and China entered full swing. Amid the overt US push to shut China out of global semiconductor supply chains, semiconductors became a “strategic item” that could not be produced in the most economically efficient places.

Meanwhile, growing concerns about a potential Chinese invasion of Taiwan as President Xi Jinping began his third term have led to calls for the company to spread its factories out geographically.

Speaking about these changes last December, Chang said, “The globalization trend is almost over. Free trade is also like a lantern in the wind.”

Within Taiwan, TSMC’s shift away from domestic production has sparked concerns. The fear is that overseas expansion of its factories could lead to technology being leaked and Taiwan’s domestic industry base being weakened. Some have questioned whether the US will be willing to come to Taiwan’s rescue in the future if TSMC’s factories are no longer there.

“TSMC is like a sacred mountain protecting Taiwan,” said Kao Yu-pan, a 29-year-old resident in Hsinchu. “It’s unfortunate that the factories keep heading overseas.”

But in Taiwan, the prevailing view is that these worries are overblown.

“TSMC’s overseas expansion is based on a complex mixture of factors,” said Wang Shinn-shyr, a professor of economics at Taiwan’s National Chengchi University.

“This will help the company’s development,” he predicted.

Other observers commented that the company is not leaving Taiwan in any essential sense. The company’s R&D center, which is a crucial element, remains in Taiwan, and even more advanced factories than the ones being built in the US or Japan have been arriving in places like Hsinchu, Kaohsiung, Tainan and Longtan.

In a speech before the Legislative Yuan last December, Taiwanese Minister of Economic Affairs Wang Mei-hua waved off concerns about the company forsaking Taiwan.

“TSMC’s R&D center is in Taiwan, as is its overall supply chain,” she stressed.

By Choi Hyun-june, Beijing correspondent

Please direct questions or comments to [english@hani.co.kr]