According to news on August 26, TSMC, the world’s largest chip foundry, is adjusting the procurement sources of 2-nanometer chip production equipment and accelerating the pace of investment in the United States. Taiwan Semiconductor Manufacturing Co.’s factories that produce the most advanced chips are gradually decommissioning chip production equipment made in mainland China to circumvent any potential U.S. restrictions that could disrupt production, according to multiple people familiar with the matter.
TSMC’s latest 2-nanometer chip production line has determined that it will not use equipment made in mainland China. As the most advanced production line in the industry, the production line was put into mass production this year. The company plans to first start production in Hsinchu City, Taiwan, and then follow up in Kaohsiung City. At the same time, TSMC is also building a third factory in Arizona that can produce 2-nanometer chips.
Three people familiar with the matter said,The decision was influenced by a potential new U.S. regulation thatThe new rules could prohibit chipmakers that receive U.S. funding or financial support from using equipment made in mainland China. The Chip EQUIP Act, spearheaded by Senator Mark Kelly, stipulates certain regulations on the sources of equipment procurement for chip companies that receive federal funding support. Industry executives believe that the mention of “entities of concern” in the draft may have an impact on some mainland Chinese suppliers.
In TSMC’s early advanced chip production lines, some well-known equipment made in mainland China was used, such as etching equipment from chip equipment manufacturer AMEC (Shanghai) Co., Ltd. and equipment from Yitang Semiconductor. Yitang Semiconductor, formerly known as Mattson Technology, an American company, was acquired by Beijing Yizhuang State Investment Corporation through the newly established Yitang Semiconductor in 2016.
TSMC’s decision is the latest example of a leading chip manufacturing company responding to growing geopolitical uncertainty. Today, the localization strategy not only covers the production process, but also extends to the resilience construction of the entire chip supply chain.
Several people familiar with the matter revealed,TSMC is also conducting a comprehensive review of all chipmaking materials and chemicals it uses, aiming to reduce reliance on mainland Chinese suppliers in its operations in Taiwan and the United States.at the same time,In order to comply with the localization policy guidance of mainland China, TSMC also plans to strengthen cooperation with local suppliers in production operations in mainland China.This strategy aims to strengthen supply chain resilience and maximize the proportion of locally sourced materials.
Sources said that about a year ago, TSMC planned to replace equipment made in mainland China in the 3-nanometer process that will start mass production in 2022, because the company intends to introduce this cutting-edge chip manufacturing to Arizona in the United States, thereby hoping to avoid U.S. regulatory risks. However, even changing qualified equipment suppliers in non-critical parts of the manufacturing process requires a lot of time and effort and may affect yield and product quality. Therefore, TSMC decided to eliminate equipment made in mainland China starting from 2-nanometer chip manufacturing, which is more advanced but has just begun mass production.
TSMC Chairman and CEO Wei Zhejia said that the company is accelerating the construction of the Arizona factory. According to him, after the expansion is completed, the United States will assume about 30% of TSMC’s cutting-edge chip (i.e., 2-nanometer and higher process) production capacity.
Generally speaking, the smaller the nanometer size, the more advanced and powerful the chip is, but the production is also more complex and challenging.
Meghan Harris, a former senior U.S. government official and semiconductor expert, analyzed this and said that some people believe that it is necessary to pay attention to the impact that specific equipment manufacturers may have on the global market structure. She added that the relevant bills are initial steps that could be taken, but progress has been limited in the past due to differing opinions within the industry. She also believes that technological advantages in the equipment field should be maintained by affecting the supply of key components and restricting some manufacturers from entering specific markets.
Mainland China's leading chipmakers have been increasing their use of domestic equipment. Analysis by "Nikkei Asia" shows that although lithography equipment is still dominated by Dutch ASML, mainland Chinese companies have made major breakthroughs in other segments. Northern Huachuang, the largest semiconductor equipment manufacturer in mainland China, has become the sixth largest manufacturer in the world, second only to industry leaders ASML, Applied Materials, Tokyo Electronics, Lam Group and Kelei.
In response to a request for comment, TSMC declined to comment on the specific equipment used in the production line, but said: "As always, TSMC's global procurement strategy focuses on a robust risk management system and establishing close partnerships with suppliers to continue to develop multi-source supply solutions to achieve a diversified global supplier base."