TSMC, in an effort to boost the consumer demand for its 3nm process, is planning to launch a Continuous Improvement Plan (CIP) for its EUV equipment, according to industry insiders. TSMC’s 3nm process is scheduled to enter mass production in the second half of 2022.
TSMC expects to raise its capital expenditure to US$100 billion for the coming three years, and 80% of which will be used on capacity expansion. However, concerns have been rising toward TSMC’s aggressive capital expenditure, fearing that it will hurt the foundry’s gross margins. Last month, reflecting exactly such a fear, Morgan Stanley downgraded TSMC’s stock rating to Neutral.
Zhan Jiahong, an analyst from Morgan Stanley, believes that TSMC’s extensive capital spending will drive its gross margins to below 50% in the long term. In the first quarter of this year, the margin stood at 52.4%. However, while TSMC’s revenues grew by 16.7% during the quarter, its product costs also grew by 15.2%.
As TSMC revealed, as of 2020, it already owned half of the world’s operating EUV lithography machines.
With EUV machines representing a large proportion of TSMC’s capital expenditure, their high costs will in turn be transferred to TSMC’s 3nm process. Fearing that the high price tag of its 3nm process would drive customers away and lead to lower gross margins, TSMC hopes that the EUV Continuous Improvement Plan will reduce the number of EUV machines it requires in the future by cutting down the EUV layers used in the 3nm process.
For N7+, TSMC has introduced EUV machines for the first time, using four EUV layers to reduce the application of multi-patterning techniques. For 6nm, five EUV layers are enquired, while 5nm reportedly use up to 14-15 layers. The 3nm process, in comparison, is expected to use up to 25 layers. With CIP, TSMC hopes to reduce the layers to 20.