TSMC Annual Report > 2016 > Company Profile > Market/Business Summary

Market/Business Summary

TSMC Achievements

In 2016, TSMC maintained its leading position in the total foundry segment of the global semiconductor industry, with an estimated market share of 56%, despite intense competition from both established players and relatively new entrants to the business.

Leadership in advanced process technologies is a key factor in the Company’s strong market position. In 2016, 54% of TSMC’s wafer revenue came from manufacturing processes with geometries of 28nm and below.

With TSMC’s focus on customer trust, the Company strengthened its Open Innovation Platform® (OIP) initiative in 2016 with additional services. During the 2016 Open Innovation Platform® Ecosystem Forum, held in September in San Jose, California, and in October in Beijing, the Company revealed 7nm FinFET Reference Flow (both full-chip and IP design), which highlighted the success of OIP-enabled design. Both forums were well attended by customers and ecosystem partners and demonstrated the value of collaboration through OIP to foster innovation.

TSMC offers the foundry segment’s widest technology portfolio and continues to invest in advanced technologies and specialty technologies, which are key differentiators vis-à-vis our competitors and provide customers more added value.

Technologies that the Company either developed or introduced in 2016 include:

Logic Technology

  • 7nm FinFET (Fin field-effect transistor) technology made good developmental progress. Risk production of this technology is planned in April 2017. A very fast yield ramp-up is expected as more than 95% of tools for 7nm FinFET are compatible with those for 10nm FinFET. Compared to 10nm FinFET, 7nm FinFET offers approximately a 25% speed improvement or a 35% power reduction. In addition, 7nm FinFET can be optimized for mobile applications and high-performance computing devices.
  • 10nm FinFET technology began production ramp-up in the fourth quarter of 2016 and started shipments in the first quarter of 2017. Thanks to its aggressive geometric shrinkage, this technology provides excellent density/cost benefits. It can be of use to customers in performance-driven market segments, including mobile, server and graphics.
  • 16nm FinFET Plus technology (16FF+) received over 50 product tape-outs in 2016, bringing the total of product tape-outs to over 90 since this technology entered volume production in 2015. And most of them achieved first-time silicon success. This technology is aimed at customers in high-performance market segments, including mobile, server and graphics. The cost-effective 16nm FinFET Compact technology (16FFC) started volume production in the first quarter of 2016. 16FFC can maximize die cost scaling by incorporating optical shrink and process simplification at the same time. In addition, the development of 12nm FinFET Compact technology (12FFC) is progressing smoothly. This technology, which drives die size and power consumption to the best levels of the foundry's 16/14nm technology, is expected to enter volume production in the second half of 2017. Both 16FFC and 12FFC can satisfy customers in mainstream and ultra-low-power (ULP) market segments, including low-end to mid-range mobile phones, consumer electronics, digital TV and the IoT (internet of things). With innovative structures, 16FFC and 12FFC can also be used in more advanced applications, including high-end mobile and networking.
  • 28nm High Performance Compact (28HPC) technology led the way in mainstream smartphones, DTVs, storage and SoC applications. 28HPC enables smaller die size circuit designs, less over-design and extraordinary power reduction with excellent process control and optimized design rules.
  • 28nm High Performance Compact Plus (28HPC+) technology provided further performance enhancement or power reduction in mainstream smartphones, DTVs, storage, audio and SoC applications. Compared to 28HPC, 28HPC+ improves device performance by 15% or reduces leakage by 50%. 28HPC+ also enables low Vdd (voltage drain) designs in ULP applications for the IoT market. In addition, this process is seamlessly applicable to the 28nm ecosystem, accelerating time-to-market for customers.
  • 40nm ULP and RF technologies started production in the first quarter of 2016 for the IoT and wearable devices related applications, such as wireless connectivity, application processors and sensor hub applications.
  • 55nm Ultra-Low Power (55ULP) technology went into production, with more than 10 customers having already taped out using this technology. Compared to 55nm Low Power (55LP) process, 55ULP can significantly increase battery life for IoT applications. In addition, it integrates RF and eFlash (embedded flash) to simplify customers' SoC designs.

Specialty Technology

  • 16FFC foundation IPs passed the Automotive Electronic Council AEC-Q100 Grade-1 qualification and were certified for functional safety standard ISO 26262 ASIL-B. In addition, TSMC 9000A was introduced for automotive IP management to complete the automotive ecosystem with third-party IP vendors.
  • 16FFC RF technology started production in the first quarter of 2016. This technology supports wireless connectivity applications, including smartphones, wireless local area networks (WLAN), and fifth generation (5G) mobile networks.
  • 28nm RF (28HPC RF and 28HPC+ RF) technologies offered extreme high-frequency devices, reliable model and comprehensive design support for wireless components in smartphone, automotive and IoT markets.
  • 40nm eFlash started volume production in the first quarter of 2016 for applications such as high-endurance security MCU (microcontroller unit), wireless MCU, and high-performance MCU, as well as IoT devices.
  • 40nm ULP eFlash was developed and started volume production in the second half of 2016 for applications such as wireless MCU, IoT devices, wearable devices and high-performance MCU.
  • 40nm high-voltage technology was qualified with 6V and 8V offerings for top-end smartphone LCD and AMOLED (active matrix organic LED) display drivers. This technology can improve display quality and reduce power consumption significantly.
  • 55nm eFlash technologies passed AEC-Q100 qualification for automotive and started volume production in the first quarter of 2016 for automotive applications such as body control module (BCM), electric power steering (EPS) and electric vehicles (EV) / hybrid electric vehicles (HEV).
  • CIS NIR+ (CMOS image sensor near infra-red plus) technology was successfully developed for higher (2X~3X) NIR quantum efficiency. This technology could enable depth sensing for the AR/VR (augmented reality / virtual reality) market and optical authentication for the smartphone market.
  • 0.13µm Bipolar-CMOS-DMOS (BCD) process started volume production on both 8-inch and 12-inch wafers in 2016. This process in 12-inch fabs extended qualification for AEC-Q100 Grade-0 in the first half of 2015.

  • 0.18µm BCD third generation passed process validation by customers. This technology, which provides superior cost competitiveness compared to the second generation, started production in the second half of 2016.
  • 0.5µm GaN (gallium nitride) on silicon 650V E-HEMT (enhanced-mode high electron mobility transistor), 650V D-MISFET (depletion-mode metal-insulator-semiconductor field-effect transistor), 100V E-HEMT and 30V D-HEMT (depletion-mode high electron mobility transistor) processes were qualified for discrete power applications. GaN on silicon technology offers high power density and efficiency in power applications.
  • Successfully developed Si-pillar WLCSP (wafer level chip scale packaging) technology, which can be applied to customers’ CMOS-MEMS (micro-electromechanical systems) motion sensor SoC designs, creating the world’s smallest packaging dimension, as small as 1.1mm by 1.3mm.

Advanced Packaging Technology

  • Integrated Fan-Out Package on Package (InFO-PoP) technology that integrates 16nm SoC and DRAM for advanced mobile products began volume production in the second quarter of 2016. It enables a thinner package, 10% less thermal resistance, more logic I/Os, and 5 to 10% higher maximum operating frequency for application processor.
  • CoWoS® (chip on wafer on substrate) XL technology homogeneously integrating multiple 20nm logic chips and heterogeneously integrating 16nm SoC plus four stacks of 4-hi (4 high) second generation high bandwidth memory (HBM2) began production in the first half of 2016. Integration of 16nm SoC, larger interposer (>1400mm2) and more than four 8-hi (8 high) HBM2 stacks is expected to be developed in 2017.
  • Fine pitch (80µm) BoT (Bump-on-Trace) Cu bump for flip chip packaging on ≧16nm silicon continued volume production in 2016. Cu bump on 10nm silicon was qualified for production start-up in 2017. Volume production also continued on ≧28nm silicon in WLCSP technologies for high-end smartphone applications in 2016. 16nm WLCSP qualification was started and is expected to be completed in the first half of 2017.
  • Market Overview

    TSMC estimates that the worldwide semiconductor market in 2016 was US$357 billion in revenue, representing 1% year-over-year growth, continuing the flattish growth in 2015. In the foundry sub-segment of the semiconductor industry, total revenue was US$47 billion in 2016, representing 8% YoY growth.

    Industry Outlook, Opportunities and Threats

    Industry Demand and Supply Outlook

    The increase in the foundry segment growth to 8% in 2016 from 4% in 2015 was driven mainly by healthier market and inventory replenishment.

    TSMC forecasts the total semiconductor market to grow 4% in 2017. Over the longer term, driven by increasing semiconductor content in electronic devices, continuing market share gains by fabless companies, gradual increase of IDM outsourcing, and expanding in-house Application-Specific Integrated Circuits (ASIC) from system companies, the Company expects foundry segment revenue growth to be much stronger than the 3% compound annual growth rate projected for the total semiconductor industry from 2015 through 2020.

    As an upstream supplier in the semiconductor supply chain, the foundry segment is tightly correlated with the market health of the three Cs, communications, computer, consumer, and the emerging IoT (Internet of Things).

    ● Communications

    The communications sector, particularly the Smartphone segment, posted a 6% growth in unit shipments for 2016. Although the growth is slowing down, continuing transition to 4G/LTE and LTE-Advanced will bring about mid-single digit growth to the Smartphone market in 2017. Smartphones with increasing performance, longer battery life, and more intelligent features will continue to propel buying interests. The increasing popularity of low-end smartphones in emerging countries will also drive the growth of the sector.

    Low-power IC is an essential requirement among handset manufacturers. The SoC design for more optimized cost, power and form factor (device footprint and thickness), plus the appetite for higher performance to run complex software and higher resolution video will continue to accelerate the migration to advanced process technologies, in which TSMC is already the leader.

    ● Computer

    After an 8% decline in 2015, the computer sector’s unit shipments dropped 6% YoY in 2016. The decline was due to prolonged replacement cycle and consumer usage moving towards mobile computing.

    The personal computer market is expected to decline by mid-single digit percentage in 2017. Increasing variety (e.g. Convertible, Ultrabook and Chromebook), the business adoption of Windows 10, and consumer replacements of aging PCs, however, are expected to help buoy PC demand.

    In terms of process technologies used in computers, requirements of lower power, higher performance and the integration of key computer components such as CPU, GPU, Chipset, etc., should drive demand for product refresh towards leading process technologies.

    ● Consumer

    The consumer sector's unit shipments declined 5% in 2016 comparing to 2015. Set-top boxes and TV game consoles showed positive growth, while the rest of the sector – TVs, MP3 players, digital cameras and hand-held game consoles – continued to decline due to unsettled environment in Eurozone and foreign exchange issues, as well as functional cannibalization by smartphones.

    Although consumer electronics will continue to decline in 2017, TV game consoles, 4K (UHD) TVs, and over-the-top (OTT) set-top boxes should achieve high growth within the sector. TSMC will be able to capture these trends with advanced technology offerings.

    ● IoT

    The Internet of Things (IoT) is taking shape as the “next big thing,” since more and more devices are being connected to the Internet. The IoT will have 10X greater installed unit potential than the smartphone will have in 2025. Applications and products benefiting from IoT related technologies include smart wearables, home robots, smart meters, smart manufacturing, self-driving cars, and so on. These applications and products will require much longer battery life, diversified sensors and low-power wireless connections, which will challenge technology development in new ways. TSMC's ultra-low-power logic and RF solutions and diversified sensing technologies will lead the way for this future growth.

    Supply Chain

    The electronics industry consists of a long and complex supply chain, the elements of which are highly dependent and correlated with each other. At the upstream IC manufacturing level, IC vendors need to have sufficient and flexible supply to handle the demand dynamics. The foundry vendors are playing an important role to ensure the health of the supply chain. As a leader in the foundry segment, TSMC provides leading technologies and large-scale capacity to complement the innovations created along the downstream chain.

    TSMC Position, Differentiation and Strategy

    Position

    TSMC is the worldwide semiconductor foundry leader for both advanced and specialty process technologies, commanding a 56% market share in 2016. Net revenue by geography, based mainly on the country in which customers are headquartered, was: 65% from North America; 15% from the Asia Pacific region, excluding China and Japan; 9% from China; 6% from Europe, the Middle East and Africa; and 5% from Japan. Net revenue by end-product application was: 8% from the computer sector, 62% from communications, 9% from consumer products, and 21% from industrial and standard products.

    Differentiation

    TSMC’s leadership position is based on three defining competitive strengths and a business strategy rooted in the Company's heritage. The Company distinguishes itself from the competition through its technology leadership, manufacturing excellence and customer trust.

    As a technology leader, TSMC is consistently first among dedicated foundries to provide next-generation, leading-edge technologies. The Company has also established its leadership on more mature technology nodes by applying the lessons learned on leading-edge technology development to enrich its specialty technologies to more advanced process nodes. Beyond process technology, TSMC has established frontend and backend integration capabilities that result in faster time-to-production and create the best power, performance and area sweet spot.

    TSMC has gained manufacturing acclaim for its industry-leading management and is extending that leadership through its Open Innovation Platform® and Grand Alliance initiatives. The TSMC Open Innovation Platform® initiative hastens the pace of innovation in the semiconductor design community and among its ecosystem partners, as well as the Company’s IP, design implementation and design for manufacturing capabilities, process technology and backend services. A key element is a set of ecosystem interfaces and collaborative components initiated and supported by TSMC that more efficiently empower innovation throughout the supply chain and drive the creation and sharing of new revenue and profits. The TSMC Grand Alliance is one of the most powerful forces for innovation in the semiconductor industry, bringing together customers, electronic design automation (EDA) partners, IP partners, and key equipment and material suppliers at a new, higher level of collaboration. Its objective is to help customers, alliance members and TSMC win business and stay competitive.

    The foundation for customer trust is a commitment TSMC made when it opened for business in 1987: to never compete with its customers. As a result, TSMC has never owned or marketed a single semiconductor product design, but instead has focused all of its resources on becoming the trusted foundry for its customers.

    Strategy

    TSMC is confident that its differentiating strengths will enable it to prosper from the foundry segment’s many attractive growth opportunities. In light of the rapid growth in four major markets, namely mobile, high-performance computing, automotive electronics, and the Internet of things (IoT), and the fact that focus of customer demand is shifting from process-technology-centric to product-application-centric, TSMC has constructed four different technology platforms to provide customers with the most comprehensive and competitive logic process technologies, specialty technologies, IPs, and packaging and testing technologies to shorten customers’ time-to-design and time-to-market.

    Mobile platform : TSMC will offer leading 7nm FinFET, 10nm FinFET, 16FF+, 20nm SoC, 28nm High Performance (HP), and 28nm High Performance Mobile (28HPM) logic process technologies as well as comprehensive IPs for high-end product applications to further enhance chip performance, reduce power consumption, and decrease chip size. For low-end to mid-range product applications, TSMC will offer 12FFC, 16FFC, 28nm Low Power (LP), 28nm High Performance Low Power (HPL), 28HPC, 28HPC+, and 22ULP logic process technologies in addition to comprehensive IPs to satisfy customer needs for high-performance and low-power chips. Furthermore, for high-end or low- to mid-level product applications, TSMC also offers the most competitive, leading-edge specialty technologies, including RF, embedded flash memory, emerging memory technologies, power management, sensors, and display chips and advanced packaging technologies such as the leading integrated fan-out (InFO) technology.

    High-performance computing platform : TSMC will offer customers leading 7nm, 16nm FinFET and 28nm logic process technologies, as well as comprehensive IPs, including high speed interconnect IPs, to meet customers’ high performance computing and transmission requirements. TSMC also offers multiple advanced packaging technologies such as CoWoS® and 3D IC technologies to enable homogeneous and heterogeneous chip system integration to meet customers’ high performance, low power, and smaller system footprint requirements. TSMC will continue to optimize our high performance computing platform offerings to help customers capture market growth driven by massive data and applications, including data analytics, artificial intelligence, and 5G wireless communications.

    Automotive electronics platform : TSMC will offer leading 7nm FinFET, 16nm FinFET, 28nm, and 40nm logic process technologies, various leading and competitive specialty technologies in RF, embedded flash memory, sensors, multiple power management technologies that pass the AEC-Q100 Grade-0 qualifications, and many advanced packaging technologies.

    IoT platform : TSMC will provide customers with ULP logic process technology options, from 16nm, 12nm, 28nm, 40nm to 55nm, the most competitive and leading-edge specialty technologies in RF, embedded flash memory, emerging memory, sensors, and display chips, as well as, multiple advanced packaging technologies including the leading InFO technology.

    TSMC continually strengthens its core competitiveness and deploys both short-term and long-term technology and business development plans, and assists customers in taking on the challenges of short product cycles and intense competition in the electronic products market to meet ROI and growth objectives.

    ● Short-Term Semiconductor Business Development Plan

    • Substantially ramp up the business and sustain advanced technology market share by increased capacity investment.
    • Maintain mainstream technology market share by expanding business to new customers and market segments with off-the-shelf technologies.
    • Continue to enhance the competitive advantages of TSMC’s platforms in mobile, high-performance computing, automotive electronics, and IoT design ecosystems so as to expand TSMC’s dedicated foundry services in these product applications.
    • Further expand TSMC’s business and service infrastructure into emerging and developing markets.

    ● Long-Term Semiconductor Business Development Plan

    • Continue developing leading-edge technologies at a pace consistent with Moore’s Law.
    • Broaden specialty business contributions by further developing derivative technologies.
    • Provide more integrated services, covering system-level integration design, design technology definition, design tool preparation, wafer processing, and backend services, all of which deliver more value to customers through optimized solutions.