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There has been a lot of discussion about the development of AI chips, but a more interesting question is how TSMC is designing its strategy to capture the most important AI chip market of the future?

TSMC has always faced pressure from competitors, especially in the competition over semiconductor process technology. People have been constantly concerned and discussing TSMC's competition with Intel and Samsung. However, we can see that TSMC has actually been performing better and better over the years.

So how does TSMC face these competitors? What is their strategy? This article will share our observations. The main points of discussion are: What are the key factors in the competition over advanced process and packaging technologies? And how does TSMC build its strategy around its most important competitive advantages?

▌Advanced Process Strategy: Beyond Process Nodes

The main focus of advanced processes is on creating smaller transistors and more efficient chips. However, the true point of competition in advanced processes goes beyond that. The key lies in the ability to mass-produce while meeting the specific needs of customers' products.

In today's world, where design-process integration is highly valued, being able to offer a process that suits the customer's requirements is far more important than just achieving technical advances in manufacturing.

To truly understand TSMC's strengths and strategies, we must first look at their key competitors and the current market demands. Therefore, we will first discuss TSMC's two main competitors, major customers, and chip market trends before we delve into their strategies.

A. Competitors in Advanced Processes

TSMC’s major competitors in advanced process technology are Samsung and Intel. Both companies aim to surpass TSMC in process node technology. Samsung was the first to adopt GAA technology and plans to use Backside Power technology by 2027. Intel, on the other hand, hopes to use Backside Power technology with its 20A process and surpass TSMC with its 18A process.

But is being the first to adopt GAA and Backside Power really the end goal of competition? This is a point worth discussing. We believe that adopting a new process technology is just the beginning of competition, not the end.

In the end, what customers need is not only more advanced process technology, but also yield rates and process designs that best match chip applications (Design Technology Co-Optimization), ensuring the chip meets the customer's cost and performance requirements.

This is something that Intel and Samsung seldom emphasize but is TSMC’s greatest strength.

B. Customer Demand for Advanced Processes

Additionally, from the design trends of AI chips, it is clear that AI chips are becoming more customized to meet specific application needs. As a result, choosing a process that balances performance and energy efficiency is a key value.

We can see that starting with its N3 process, TSMC began offering more customized process options, referred to as FinFlex, allowing IC designers to better choose the trade-offs between power and performance. Starting with the N2 process, TSMC also introduced NanoFlex options, further optimizing the nanosheet process for customers.

Of course, FinFlex and NanoFlex are just examples. TSMC’s roadmap clearly shows that they offer a range of process optimizations tailored to different chip applications. Combined with TSMC's superior process yields, this is something that other competitors cannot easily replicate, making it a core part of TSMC’s advanced process strategy.

Conclusion on Advanced Process Strategy:

In the realm of advanced processes, the key point of competition in semiconductor manufacturing goes beyond simply achieving the latest node. It extends to yield rates, customization, and integration with IC design.

TSMC's strategy is to continue achieving manufacturing excellence while offering more customized processes for various chip applications, helping a wide range of customers tailor solutions to their specific needs.

▌Advanced Packaging Strategy

For TSMC, advanced packaging is not just about packaging chips for customers. It is a crucial piece of the puzzle that elevates TSMC to a "Foundry 2.0" level. This allows TSMC to transition from just advanced process manufacturing to a broader role as a "System Fab" or system manufacturing platform.

In the field of advanced packaging, TSMC not only offers 2.5D & 3D packaging services like CoWoS and SoIC but also extends to providing 3DBlox, an open-source 3D IC design language, enabling IC designers to design their desired chips more quickly.

In this context, TSMC is not without competitors, but the integrated nature of chip and system requirements means that this segment must be viewed together with advanced processes.

C. Competitors in Advanced Packaging

In this space, the competitors are still Intel and Samsung. Notably, Intel was one of the first companies to propose a System Fab concept and initiated the UCIe Chiplet alliance. Intel’s advanced packaging technologies are highly competitive.

D. Customer Demand for Advanced Packaging

Due to the growing demand for AI chips, customers are increasingly seeking integrated solutions that combine advanced process technology with advanced packaging. The trend in AI chip design is to use a combination of advanced process, chiplet design, and HBM (or SRAM), integrating these components through advanced packaging.

Because of the demand from large language models, AI chip customers almost universally require the full integration of advanced processes and advanced packaging.

As a result, for IC design customers who are not experts in semiconductor manufacturing, the ability to provide full integration across these elements is critical. This is where TSMC’s overall integration capabilities stand out as a key competitive advantage.

TSMC has long been offering different manufacturing platforms tailored to various applications, providing a comprehensive service that competitors struggle to match.

Conclusion on Advanced Packaging Strategy:

TSMC's strategy and advantages in advanced packaging are closely tied to its strengths in advanced processes. Another significant advantage for TSMC is its ability to collaborate with innovative startups in producing AI chips, such as Tesla and Cerebras. These partnerships allow TSMC to gain valuable experience in manufacturing cutting-edge AI chips, a competitive edge that other companies find hard to match.

Therefore, TSMC’s irreplaceable advantage and competitive strategy in advanced packaging lie in its comprehensive AI chip manufacturing services, coupled with the opportunity to be the first to gain experience in producing innovative AI chips.

▌Conclusion: TSMC's AI Manufacturing Platform Strategy

In conclusion, while many may discuss TSMC’s advanced processes and advanced packaging separately, we believe TSMC's real strategic advantage lies in its overall integration. In the semiconductor manufacturing industry, compared to Intel and Samsung, TSMC is the company with the most comprehensive manufacturing capabilities and the deepest understanding of customer needs.

This is an interesting aspect from a strategic perspective. If we only look at either advanced processes or advanced packaging in isolation, there may be concerns about TSMC's competition with its rivals. However, when we look at TSMC's strategy from a holistic perspective, it becomes clear that its "manufacturing platform strategy" gives it a strong advantage over competitors. Thus, in the foreseeable future, we can expect TSMC to continue innovating and adding value to its manufacturing platform.ected to Data, and make sure to Preview your Site to check that everything is connected correctly.