On November 9, Taiwan Semiconductor Manufacturing Co. (TSMC) confirmed its partnership with Sony Semiconductor Solutions Corp. (SSS) to set up the joint venture Japan Advanced Semiconductor Manufacturing (JASM). The joint venture is expected to spend US$7 billion the construction of a new fab, beginning in 2022. Volume production will begin by the end of 2022, focusing on 28nm and 22nm-based speciality technologies.
The joint venture marks an unprecedented move
It is an unprecedented move for the Taiwanese foundry: it marks the first time that TSMC creates a fab in the form of a joint venture, breaking with its tradition to create wholly owned subsidiaries, as embodied by the TSMC Arizona Corp. responsible for the 5nm fab in Phoenix, USA.
To an extent, TSMC’s decision to enter a joint venture hints at the potential of deeper technological cooperations with Sony. For example, TSMC’s production facilities in the United States and China are more commercially driven, aiming to serve its clients in a closer proximity. Therefore, TSMC preferred the wholly-owned model to protect its intellectual properties. In contrast, as Japanese clients have generally accounted for less than 5% of TSMC’s annual capacity, the joint venture model signals less emphasis on IP protection.
As Ray Yang, a senior analyst from Taiwan’s Industrial Technology Research Institute (ITRI), observed, the creation of JASM was not solely motivated by the Japanese market. Yang pointed out Sony’s leading position in the global CMOS image sensor industry, and raised the possibility that TSMC might cooperate with Sony in this particular field. Meanwhile, TSMC has so far declined to comment on future cooperations with Sony. It is only known that Sony will spend US$500 million on the project, taking an equity stake of less than 20% in JASM.
Subsidies and talent acquisition a long-term challenge
Given TSMC’s strategic role in Japan’s semiconductor policy, Yang also noted that Sony’s participation in the project would facilitate the obtainment of Japanese government subsidies. Recently, the head of Japan’s Ministry of Economic Security, Takayuki Kobayashm, remarked that TSMC’s new fab in Japan represented the country’s first step to revive its faltering semiconductor industry. Accordingly, the Japanese government is planning a subsidy mechanism to support TSMC and other similar endeavors in the future.
Takashi Yukami, director of Japan’s Microfabrication Research Institute, however argued that the Japanese government had not provided enough subsidies in comparison to those from the US. He observed that Japan lacked a comprehensive plan to provide the necessary infrastructure to support a TSMC fab, including utilities and raw chemical material.
Above all, he identified talent shortage to be a major challenge encountered by both TSMC and the Japanese government. Yukami indicated that even though the 20nm process was considered to be a mature technology for TSMC, Japanese engineers remained unfamiliar with it. “It would take hundreds of engineers to support a fab with a capacity of 100,000 wafers per month, and Japan simply has no such engineers,” Yukami said.
For TSMC, however, talent shortage is a major challenge too. As a semiconductor policy analyst observed, the shortages of talents and utilities would increasingly drive TSMC to look beyond Taiwan, where it operated 95% of production capacity. Even Morris Chang, TSMC founder, and Mark Liu, TSMC’s chairman, pointed to the company’s difficulties to source Taiwanese talents to sustain TSMC’s global operations: Liu expressed his concerns on TSMC’s future trajectory, having noted that many young TSMC engineers were reluctant to relocate to the U.S. Similarity, Chang lamented that Taiwanese managers lacked the experiences to manage U.S, operations.