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Taiwan’s TSMC continues to lead highly capital-intensive semiconductor industry

High cost of entry has meant fewer companies increasingly control larger shares of overall chip market

TSMC logo.

TSMC logo. (AP photo)

TAIPEI (Taiwan News) — The semiconductor sector continues to be a highly capital-intensive industry, with only a few companies able to effectively compete in the field.

According to DigiTimes estimates, it costs around US$2.4 billion (NT$66.8 billion) to construct a 12-inch wafer plant that produces 90nm chips with a monthly production capacity of 50,000 wafers. The price tag jumps to US$6 billion for a 28nm fab and US$16 billion for a 5nm plant.

The high cost of entry has meant a small number of companies increasingly control larger shares of the overall chip market. Prior to the 1998 Asian financial crisis, the top five foundries were responsible for 27% of world investment, according to the report.

After the sub-prime mortgage loan crisis in 2008, that concentration ratio rose to 58%, while it now hovers around 72%, per DigiTimes. Among the top five, Taiwan Semiconductor Manufacturing Co. (TSMC) controls the lion’s share of the global contract manufacturing market, with capital expenditures for 2021 estimated to hit 54% of revenue, the report said.

DigiTimes pointed out that while there have been rumors that fabless chipmakers like Qualcomm, AMD, and Nvidia could move from TSMC to Samsung for chips, Samsung’s foundry revenues of less than US$15 billion mean that the South Korean company will struggle with capacity. The outlet speculated that Samsung would only be able to take the lead in one or two process nodes or potentially poach one or two TSMC customers at most.

Samsung’s threat to TSMC should remain minimal till at least 2025, DigiTimes said.

The next few years should see sustained growth in semiconductors, with growing demand for data centers and high-efficiency chips. The chip sector should also expect surging demand from the electric vehicle industry.

New design architectures in addition to technological improvements will increasingly become important for semiconductors, said DigiTimes. Industry innovation will focus on advanced packaging and test technology, the report added.

Overall, the U.S. will still lead in global technology, while Taiwan will continue to capitalize on unique advantages in regional markets and specialty areas, DigiTimes concluded.

Updated : 2022-05-20 13:36 GMT+08:00