Taiwan TSMC's R&D spending hits high of almost US$3 billion in 2019

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(CNA photo)

Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chipmaker, saw its spending in research and development hitting a new high of almost US$3 billion in 2019, allowing the company to maintain its lead in production technology over its peers.

According to TSMC's 2019 corporate social responsibility report, the chipmaker spent US$2.96 billion on R&D, up 4 percent from a year earlier, with the number of its R&D workforce up 5 percent at 6,534.

The spending accounted for about 8.5 percent of TSMC's total sales in 2019, as the company had anticipated. The chipmaker has said it expects that its R&D spending will make up 8.5 percent of its annual revenue until 2030.

In 2019, TSMC's sales hit a new high of NT$1.07 trillion and it was the 10th consecutive year for the chipmaker to post a record high in sales.

Based on TSMC's forecast, its sales for 2020 will grow 14-19 percent from 2019, so its R&D spending is expected to reach another high, ranging between US$3.37 billion and US$3.52 billion this year.

Riding the wave of growing R&D spending, TSMC launched mass production of the advanced 7 nanometer-plus process in the second quarter of 2019, and was soon matching yields similar to the original 7nm process, which has been in commercial production for more than a year.

In addition, the chipmaker started mass production of the sophisticated 5mn process earlier this year and has estimated that the 5mn process will account for about 10 percent of its sales this year.

Moreover, the company has been developing the even more sophisticated 3nm process, which is expected to start mass production in 2022, as well as the 2nm process or even more advanced technologies.

Commenting on TSMC's growing R&D spending, analysts said that is the reason why the Taiwanese chipmaker has been able to serve as the sole processor provider to Apple Inc. for iPhone production in recent years.

By taking advantage of its efforts in R&D, analysts added, the chipmaker has also secured large orders from HiSilicon Technologies Co., an integrated circuit design unit of Chinese telecom equipment supplier Huawei Technologies Co., U.S. clients such as Advanced Micro Devices Inc., NVIDIA Corp. and Qualcomm Inc., as well as Taiwanese IC designer MediaTek Inc.

The analysts added that TSMC has not only led South Korean rivalSamsung Electronics Co. but has also left its Chinese rival, Semiconductor Manufacturing International Corp., about two generations behind.

As TSMC is keen to pour large funds into technology upgrades, the analysts said, the company appeared reluctant to resort to acquisitions for business expansion, unlike its smaller Taiwanese rival, United Microelectronics Corp. (UMC), which bought Mie Fujitsu Semiconductor Ltd. last year and is said to be looking forward to more buy-ins.

Analysts said TSMC prefers to build its own wafer plants, citing its plan to build a 5nm wafer plant in the U.S. state of Arizona to gain easier access to its clients, noting the state currently has no 5mn wafer plants and that the presence of TSMC is expected to boost the company's competitive edge.

According to TSMC, the wafer plant will have a monthly production capacity of 20,000 units and is expected to directly create 1,600 high-tech professional jobs and thousands of others in the semiconductor ecosystem. (By Chang Chien-chung and Frances Huang)