Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which supplies processors for Apple Inc’s iPhone 6S series of smartphones, yesterday said it has submitted an application to the government to build a new US$3 billion 12-inch wafer factory in China to cater to fast-growing customer demand.
The investment plan also includes a new design service center in Nanjing, TSMC said.
The Nanjing facility, which is to be wholly-owned by the chipmaker, is expected to begin production of advanced 16-nanometer chips in the second half of 2018, the company said in a statement.
The chipmaker’s announcement came about four months after the Ministry of Economic Affairs relaxed investment rules, allowing local chipmakers to operate 100 percent-owned 12-inch wafer factories in China to help them better protect intellectual property.
“In view of the rapid growth of the Chinese semiconductor market, we have decided to establish a 12-inch wafer fab and a design service center in China to provide closer support to our customers there and to further expand our business opportunities,” TSMC chairman Morris Chang (張忠謀) said in the statement.
TSMC’s 12-inch wafer factory would be the third such facility by Taiwanese chipmakers in China after United Microelectronics Corp (UMC, 聯電) and Powerchip Technology Corp (力晶科技) started construction of their first 12-inch wafer factories in China earlier this year.
However, TSMC’s investment would be the largest, as UMC and Powerchip teamed up with their Chinese partners, primarily local governments, to build their factories.
“The Chinese semiconductor market has grown rapidly in recent years, and, with the addition of policy support from the Chinese government, we have high expectations for its growth,” TSMC said. “It is a market that every semiconductor company must pay close attention to when considering its global strategy.”
TSMC has a broad customer base that includes China’s Hisilicon Technologies Co (海思半導體), which is owned by Huawei Technologies Co (華為), and Spreadtrum Communications Co (展訊通信), as well as mobile phone chip suppliers MediaTek Inc (聯發科) and Qualcomm Inc.
TSMC said the Chinese semiconductor market has been growing rapidly, reflected in strong growth for the company’s business, which has grown at a compound annual rate of 50 percent over the past five years.
The Chinese market accounted for only 6 percent of TSMC’s total revenue of NT$212.51 billion (US$6.45 billion) last quarter.
“The investment makes sense, as China has surpassed North America as the world’s largest semiconductor market. Demand is strong there,” TrendForce Corp (集邦科技) semiconductor analyst Lin Jian-hong (林建宏) said.
The move would also help TSMC win orders from smartphone brands aiming to sell more products in China, as Beijing is considering boosting its presence in the global semiconductor industry by encouraging using locally produced chips, Lin said.
To ensure the investment is in line with the law, TSMC said that it plans to have been producing 10-nanometer chips in volume in Taiwan for more than a year by 2018, meaning its Nanjing factory would produce chips one generation less advanced — a 16-nanometer process — than its Taiwanese factories.
The Nanjing factory is planned to have capacity of 20,000 12-inch wafers per month and is expected to make up about 2.5 percent of TSMC’s total manufacturing capacity when it starts mass production, a separate company statement said.
The chipmaker plans to hire 1,700 workers for its Nanjing factory and designer service center, it added. In China, TSMC currently operates only an 8-inch factory in Shanghai.
The Investment Commission yesterday said it would make a ruling on TSMC’s planned investment before the Lunar New Year holiday begins in February next year.
“It will be difficult for us to complete the review before the end of this month, but if TSMC has filed the required documents, we could finish the review within two months,” commission Executive Secretary Emile Chang (張銘斌) told a news conference.
Emile Chang said the commission would transfer TSMC’s application to a technology review team established by the Industrial Development Bureau to assess the details of the semiconductor giant’s planned investment.
After receiving the review team’s opinion on the application, the commission will transfer the case to other government agencies for further deliberation before making a final ruling on the case, Emile Chang said.
The bureau said it has not received TSMC’s application from the commission, but it thinks the planned investment should help the company secure its position in the Chinese market.
“Having their own 12-inch wafer factory could help TSMC directly receive orders from Chinese clients in China,” bureau official Tsai Chung-ping (蔡忠平) told a teleconference.
Additional reporting by Lauly Li
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