TSMC Annual Report > 2015 > Company Profile > Market/Business Summary

Market/Business Summary

TSMC Achievements

In 2015, TSMC maintained its leading position in the total foundry segment of the global semiconductor industry, with an estimated market share of 55%. TSMC achieved this result despite intense competition from both established players and relatively new entrants to the business.

Leadership in advanced process technologies is a key factor in TSMC’s strong market position. In 2015, 48% 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 2015 with additional services. During the 2015 Open Innovation Platform® Ecosystem Forum, held in September in Santa Clara, California, the Company revealed 10nm FinFET Reference Flow (both full-chip and IP Design), which highlighted the success of OIP-enabled design. The Forum was well attended by both customers and ecosystem partners and demonstrated the value of collaboration through OIP to foster innovations.

TSMC offers the foundry segment’s widest technology portfolio and continues to invest in advanced technologies and specialty technologies, which is a key differentiator from our competitors and provides customers more added value.

Technologies that the Company either developed or introduced in 2015 include:

Logic Technology

  • 7nm FinFET technology made good developmental progress. Risk production of this technology is expected to start in the first quarter of 2017. A very fast yield ramp-up is expected as the Company leverages the advantage that more than 95% of tools for 7nm FinFET are compatible with those for 10nm FinFET. Currently, we are working with several customers on multiple product tape-outs. Compared to 10nm FinFET, 7nm FinFET features approximately 15~20% speed improvement or 35~40% power reduction. In addition, 7nm FinFET provides customers optimized processes for mobile applications and high-performance computing devices.
  • 10nm FinFET technology began customer product tape-out in the first quarter of 2016. Thanks to its aggressive geometric shrinkage, this technology offers 2.1X gate density improvement over 16nm, providing excellent density/cost benefits. It can serve customers from all different market segments, including mobile, server and graphic.
  • 16nm FinFET Plus technology (16FF+) entered high-volume production in 2015 with yield ramping ahead of plan. Currently, a total of approximately 50 product tape-outs were received. Most of them achieved first-time silicon success. TSMC’s comprehensive 16FF+ design ecosystem supports a wide variety of Electronic Design Automation (EDA) tools and hundreds of process design kits with more than 100 Intellectual Property cores (IPs), all of which have been silicon validated. In addition, 16nm FinFET Compact technology (16FFC), a cost-effective version of TSMC’s 16nm technology, started volume production in the first quarter of 2016. This process is also seamlessly applicable to the 16nm ecosystem, accelerating time-to-market for customers. 16FFC can maximize die cost scaling by incorporating optical shrink and process simplification at the same time.
  • 20nm System-on-Chip technology (20SoC) entered volume production with stable yield performance. It provides better density and power value than 28nm thanks to its advanced patterning technique for both performance-driven products and mobile computing applications migration.
  • 28nm High Performance Compact (28HPC) technology for mobile computing led the way for 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 for mobile computing provided further performance enhancement or power reduction of mainstream smartphones, DTVs, storage, audio and SoC applications. Compared to 28HPC, 28HPC+ improves device performance by 15% or reduces leakage by 50%. In addition, 28HPC+ enables low Vdd designs in Ultra Low Power (28ULP) applications for the Internet of Things (IoT) market. In addition, this process is seamlessly applicable to the 28nm ecosystem, accelerating time-to-market for customers.
  • 28nm Low Power (28LP and 28HPC) and RF (28LP-RF and 28HPC-RF) technologies were used for entry-level smartphones, application processors, tablets, home entertainment systems and digital consumer applications.
  • 40nm ultra-low power and RF technologies started production in the first quarter of 2016 for the IoT and wearable devices related applications, such as wireless connectivity, application processor, and sensor hub applications.
  • 55nm Ultra-Low Power (55ULP) technology went into production. Compared to 55nm Low Power (55LP) process, this technology can significantly increase battery life for IoT applications. In addition, 55ULP integrates RF and eFlash to enable customers’ SoC designs.

Specialty Technology

  • The world’s first 16FF+ SoC for automotive applications was successfully produced.
  • 40nm eFlash started risk production in the fourth quarter of 2015 for applications such as high-endurance security MCU, wireless MCU, IoT devices, and high-performance MCU, etc.
  • 40nm Ultra-Low Power (ULP) eFlash was developed and is expected to start production in the second half of 2016 for applications such as wireless MCU, IoT devices, wearable devices, and high-performance MCU.
  • 55nm Ultra-Low Power (ULP) eFlash started production for battery-powered applications, such as wireless MCUs, IoT, wearable devices, and general-purpose MCUs.
  • 55nm eFlash technologies started risk production for automotive applications in the fourth quarter of 2015, such as body control module (BCM), Electric Power Steering (EPS) and electric vehicles (EV)/hybrid electric vehicles (HEV).
  • 40nm high-voltage technology was qualified for top-end smartphone display drivers. This technology can improve display quality and reduce power consumption significantly.
  • 45nm 1.0 pixel TSMC Stacked Illumination CMOS Image Sensor technology was fully qualified and started production in the fourth quarter of 2015 for mid- to high-end mobile cameras.
  • 0.13µm Bipolar-CMOS-DMOS (BCD) process was readied for production on both 8-inch and 12-inch wafers. This process in 12-inch fabs extended qualification for Automotive Electronic Council (AEC) AEC-Q100 Grade-0 in the first half of 2015.
  • 0.18µm BCD third generation underwent process validation by customers. Compared to the second generation, this technology provides superior cost competitiveness and is expected to ramp in the second half of 2016.
  • 0.5µm GaN on Silicon 650V Enhancement Mode HEMT process was qualified for discrete power applications. Customer samples were sent out to hundreds of their customers for qualification, as this technology is expected to enter production in the second half of 2016.
  • Successfully demonstrated the world’s smallest CMOS-MEMS monolithic pressure sensor with accuracy down to 10cm air pressure change in elevation.
  • Successfully demonstrated Bio Metal-Oxide-Semiconductor Field-Effect Transistor (Bio-MOSFET) technology for bio-chemical analysis, with 5-10X sensitivity improvement over traditional techniques. It can provide high accuracy and high throughput analysis for Point-of-Care applications.
  • Advanced Packaging Technology

  • InFO PoP technology that integrates 16nm SoC and DRAM for advanced mobile products was successfully qualified in the fourth quarter of 2015. This technology is expected to start volume production in the first half of 2016.
  • CoWoS-XL (CoWoS® technology that features extra-large interposer of > 32mmx26mm in size) was successfully developed and qualified in 2015. It enables the integration of more or bigger advanced chips in one CoWoS® module. Volume production is expected in the first half of 2016 for the 20nm multi-chip scheme for FPGA and 16nm SoC integrated with next generation high-bandwidth DRAM (HBM2) devices for ultrahigh-performance computing using the CoWoS-XL scheme.
  • Production started in 2015 of fine pitch (80µm pitch) Bump-on-Trace (BoT) Cu bump technology for flip chip packaging on 16nm silicon as well as for 28nm silicon in Wafer Level Chip Scale Packaging (WLCSP) technologies for mobile applications.

Market Overview

TSMC estimates that the worldwide semiconductor market in 2015 was US$354 billion in revenue, representing zero year-over-year growth, a sharp plunge from the 10% YoY growth recorded in 2014. In the foundry sub-segment of the semiconductor industry, total revenues were US$44 billion in 2015, representing 4% YoY growth.

Industry Outlook, Opportunities and Threats

Industry Demand and Supply Outlook

The decline in the foundry segment growth to 4% in 2015 from 14% in 2014 was driven mainly by a market slowdown and a prolonged inventory correction.

TSMC forecasts the total semiconductor market to grow 1% in 2016. Over the longer term, driven by increasing semiconductor content in electronic devices, continuing market share gains by fabless companies, 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.

● Communications

The communications sector, particularly the Smartphone segment, posted a 10% growth in unit shipments for 2015. Although the growth is slowing down, continuing transition to 4G/LTE and LTE-Advanced will bring mid- to high-single digit growth to the Smartphone market in 2016. Smartphones with increasing performance, lower power usage 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), 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 a 1% decline in 2014, the computer sector’s unit shipments dropped 8% YoY in 2015. The decline was driven by prolonged replacement cycle, inventory correction, the end of Windows XP migration, and the new Windows 10 free upgrade.

The personal computer market is expected to decline by mid-single digit percentage in 2016. Increasing variety (e.g. Convertible, Ultrabook and Chromebook), the business adoption of Windows 10, and steady consumer upgrades to aging PCs, however, are expected to help buoy PC demand.

Requirements of lower power, higher performance and the integration of key computer components such as CPU, GPU, Chipset, etc., should drive demand for product redesign towards leading process technologies.

● Consumer

The consumer sector’s unit shipments declined 6% in 2015. While new-generation TV game consoles and set-top boxes still showed positive growth, the rest of the sector – TVs, MP3 players, digital cameras and hand-held game consoles – continued to decline due to economic softness and foreign exchange issues, as well as functional cannibalization by smartphones.

Although consumer electronics will continue to decline in 2016, 4K (UHD) TVs and 4K set-top boxes should achieve high growth within the sector. TSMC will be able to capitalize on 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, 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 help customers 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, it is important for IC vendors to have sufficient and flexible supply to support the dynamic market situation. 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 55% market share in 2015. Net revenues by geography were: 68% from North America; 12% from the Asia Pacific region, excluding China and Japan; 8% from China; 7% from Europe, the Middle East and Africa; and 5% from Japan. Net revenues by end-product application were: 8% from the computer sector, 61% from communications, 8% from consumer products, and 23% 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. TSMC 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 that 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 front-end 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 newly created 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 materials 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. TSMC maintains its technology leadership by collaborating in the development process through early engagement and technology definition that provides a smooth transition for TSMC’s advanced technology customers.

TSMC’s 20nm System-on-Chip technology (20SoC) entered the volume production stage with stable yield performance, while its 16nm FinFET Plus (16FF+) process started volume production in mid-2015. By leveraging the success of 16FF+, TSMC introduced a highly competitive cost-effective solution, 16nm FinFET Compact technology (16FFC), which started volume production in the first quarter of 2016. In addition, TSMC’s 10nm FinFET technology began customer product tape-out in the first quarter of 2016. Also, 7nm FinFET technology is under development with good progress. This technology is expected to start risk production in the first quarter of 2017. At the same time, the Company has maintained its leadership in specialty technologies by broadening its offerings and expanding their integration into more advanced process nodes.

Numerous other efforts are underway to ensure manufacturing excellence through product grade enhancements and manufacturing technology innovation. On the advanced 3D IC packaging technology front, InFO PoP technology for advanced mobile products was successfully qualified in the fourth quarter of 2015 and is expected to start volume production in the first half of 2016. In addition, CoWoS-XL (CoWoS® technology that features extra-large interposer of >32mmx26mm in size) was successfully developed and qualified in 2015. This technology is expected to start volume production in the first half of 2016.

To address challenges inherent in the electronic product life cycle and increased competition from other semiconductor manufacturing companies, TSMC continually strengthens its core competitiveness and deploys both short-term and long-term technology and business development plans to meet Return on Investment (ROI) and growth objectives.

● Short-term Semiconductor Business Development Plan

  • Substantially ramp the business and sustain advanced technology market share through increased capacity investment.
  • Maintain mainstream technology market share by expanding business to new customers and market segments with off-the-shelf technologies.
  • Further expand TSMC’s business and service infrastructure into emerging and developing markets.

● Long-term Semiconductor Business Development Plan

  • Continue developing leading-edge technologies 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.