TSMC’s expanding chip production makes Taiwan world’s largest market for equipment purchases
By Gloria Cho
TAIPEI, NNA—Taiwan is expected to remain the world’s largest semiconductor manufacturing equipment market this year with estimated purchases of nearly $15.43 billion as its bellwether contract chipmaker plunges ahead with advanced production to keep its edge over competitors.
Taiwan ranked first last year on spending of $17.12 billion, a 68 percent change from 2018. China was in second place with an outlay of $13.45 billion, followed by South Korea at $9.97 billion, according to SEMI, an international electronics manufacturing industry body.
A key reason is Taiwan Semiconductor Manufacturing Co., world’s largest contract chipmaker.
The firm had allocated $14.9 billion for capital expenditures in 2019. The company better known as TSMC raised it to between $15 to 16 billion this year, 80 percent of which will go for advanced processing technologies, company officials have told investors.
The chipmaker aims to enter volume production at a relatively advanced 5-nanometer chipmaking facility in the first half of this year. The company also plans to begin mass production of 3-nanometer process chips in 2022 and expects the rollout by 2024 of a 2-nanometer plant.
Nanometer numbers refer to the sizes of cuts in a silicon chip. Smaller cuts allow the processors to run faster and sometimes with fewer defects.
Expansions such as TSMC’s augur well for suppliers.
United Integrated Service Co., a Taiwan-based cleanroom contractor for seven TSMC factories, raked in NT$24 billion ($802 million) in revenue in 2019, a 32 percent jump from the previous year.
“The result is largely thanks to the continuous growth in the Taiwan market,” United Integrated Service spokesman Benny Chen told NNA on April 30. “We expect an even better sales performance this year.”
Semiconductor-related sales make up 80 percent of his company’s total revenue, Chen said. Contracts this year to date have exceeded NT$40 billion, he added.
TSMC is ready to become the world’s first high-volume producer of chips using extreme ultraviolet lithography technology in 7-nanometer process and below, the company said in its 2019 annual report.
This production line is lifting business for Gudeng Precision Industrial Co., one of the world’s two makers of extreme ultraviolet pods, the Taiwanese company said. The pods are used to transport reticle that prints images on wafers in a contamination-free environment.
To meet an anticipated boom in demand for the pods, Gudeng had spent more than NT$600 million since 2014 for a plant expansion in the southern city Tainan. The project has reached its final stage, a company official told NNA on May 4.
“With the newly-added capacity, we believe our output will be able to meet demand from potential markets we’ll reach in the future,” said the official, who declined to give a name. “We are expecting stable growth in the revenue of second quarter with semiconductor-related businesses contributing more.”
But by next year, Taiwan will be lapped by China and South Korea as the biggest market for chip-related purchases, SEMI forecasts. China will become the largest spender by $16.44 billion, followed by South Korea at $14.45 billion and Taiwan at $14.43 billion, it says. The Chinese government actively supports growth in the chip sector and is expected to offer special aid to firms affected by the coronavirus outbreak.
Such forecasts coincide with Gudeng’s view on China as a market with potential for rapid growth, the company official said.
Gudeng has sold equipment in China over the past decade to help transport wafers against contamination and damage.
“The outlook for 2021 is uncertain and still subject to dynamic adjustment,” Liu Pei-chen, researcher and industry consultant at Taiwan Institute of Economic Research told NNA on Tuesday. “But China is likely to expand financial aid to support the semiconductor industry in the aftermath of the Covid-19 pandemic.”
China has more land and a bigger end-user market than Taiwan. But it will “stick to a relatively high expenditure for chipmaking equipment in the coming years,” Liu said.