TSMC insists its chips for Huawei do not fall into the category of the US ban. Photo: CNA

TSMC, Taiwan’s leading chipmaker, has unveiled an aggressive plan to splurge on 5G research and development. It aims to entrench its lead in the new era of ultrafast wireless communications when chips will be the backbone component used to make devices stay connected and crunch huge quantities of transmitted data.

The semiconductor foundry based in Hsinchu, Taiwan, plans to spend between US$14 billion and $15 billion next year as worldwide rollout of 5G networks and new handsets boost demand for smaller, more advanced and power-efficient chips.

Specifically, more than half of its hefty R&D outlay will be earmarked for equipment for 5-nanometer chip production, as its anchor customers like Apple are gearing up to launch its 5G iPhones next September. By comparison, the main chip currently powers its iPhone 11, the A13 Bionic, is of the 7nm configuration.

TSMC announced the investments at an annual supply-chain forum in Hsinchu last week attended by 700 partners from across the globe, adding that the planned capital expenditure would generate sustained returns for the company as long as issues like production bottleneck can be swiftly addressed.

TSMC is the largest contract chipmaker in the world. Photo: tsmc.com

“The acceleration of 5G deployment across the world is leading to much stronger demand for our 7nm and 5nm capacity,” said JK Wang, senior vice president of TSMC’s production and fab operations. “As a result, we [in October] raised capital spending for 2019 by US$4 billion. We expect next year’s capital spending will be at a similar level.”

5G technology provides low-latency and high-bandwidth connections so that artificial intelligence-enabled devices can make the right, prompt decisions while they are connected to each other via a 5G network, Wang said.

To meet the buoyant demand, TSMC plans to kickstart mass production of 5nm chips in the first half of next year at a multibillion US dollar facility in the southern Taiwanese city of Tainan. TSMC announced in October that it would be the first wafer foundry capable of churning out 5nm chips in bulk when the technology becomes commercially available.

It also plans to start mass production of 3nm chips in 2022, in line with Moore’s Law that transistor count will double every two years due to shrinking transistor dimensions.

To facilitate the development of next-generation cutting-edge technologies beyond 3nm chipsets, TSMC has pinned high hopes on a shovel-ready new R&D center near its headquarters campus in Hsinchu to house 8,000 engineers, with completion slated for 2021.

Meanwhile, Taiwanese papers also revealed last month that a group of senior executives from Chinese telecoms giant Huawei had called on TSMC founder Morris Chang and senior members of the management in Taiwan to make a case for continued cooperation, including setting up a new factory in mainland China, with the promise of more orders.

TSMC only assembles less advanced chips of the 8nm and 12nm configuration at its mainland plants in Shanghai and Nanjing.

Huawei, amid a reprieved US ban on the export of chips and other key components, has to convince TSMC not to follow Qualcomm and the like to sever ties when the US has been piling pressure on the Taiwanese firm.

Huawei’s new flagship phone the Mate 30 does not have any chips from the US.

Retaining TSMC as a core supplier is especially important given reports claiming that Huawei has been forced to source chips from partners outside the US for its latest handsets.

A recent report by UBS said that the latest offerings from the Shenzhen-based telecoms giant, including its new flagship model Mate 30, debuted in September to take on the iPhone 11 Pro, contained no chips from the US, with alternatives sourced from suppliers in the Netherlands, and the phone’s electronic amplifier is now made by its own semiconductor subsidiary.

Read more:

Taiwan mulls export control on chips for Huawei

Chinese chipmakers aim to close tech gap

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