In the previous article (Advanced Process Semiconductor Demand Estimation), we calculated the demand for advanced process semiconductors (mainly 3nm and 5nm). Now, let's see if the supply can meet the demand. Since the majority of the production capacity for 3nm and 5nm is at TSMC, we will only calculate TSMC's supply. In addition, factors limiting TSMC's supply capacity include its own capital expenditure limits and ASML's EUV supply capacity, which we will also calculate in this article.
TSMC
TSMC's capital expenditures over the years are public data. According to news reports on the progress of its factory construction, we find that it takes TSMC two years to build a new factory, and then another year for production capacity to ramp up. Therefore, it can be assumed that TSMC's annual increase in production capacity is equal to the average capital expenditure amount two to three years ago, as shown in the table below:
According to TSMC, 80% of capex is invested in advanced production capacity. We have made assumptions about the capex distribution for each process technology based on this, as shown in the table below. The data for 2021 is calculated based on the changes in TSMC's production capacity between 2020 and 2021.
We expect that 7nm production capacity will no longer increase and may even decrease, as AMD will upgrade its CPUs and GPUs for computers and servers from 7nm to 5nm starting in the second half of 2022. In terms of demand for advanced processes, the first adopters of new processes are usually Apple chips, followed by other smartphone chip manufacturers (such as Qualcomm and MediaTek), and then computer chips (AMD, Intel, Nvidia). After that, there is a gap with no other significant demand. If demand is insufficient, TSMC will reduce production capacity, such as the 28nm in 2019. This reduced capacity can be converted to higher process capacity by adding some machinery costs, which is less than the capex spent on building new factories and expanding production.
Proportion of TSMC’s revenue by each process:
TSMC's production capacity of each process:
According to the data we have collected, for TSMC, every additional 1k 5nm WPM (wafer per month) costs 293 million, 3nm costs 608 million, and 7nm costs 237 million. Based on this, we can calculate the annual capex for the increased capacity of each process, which allows us to estimate TSMC's annual capacity for each process.
Comparing this with the previously calculated advanced process wafer demand, we find that the supply and demand of 3nm and 5nm wafers are roughly similar, which indicates that our calculation method is reasonably reliable.
By combining the unit price of wafers for different processes, we can calculate TSMC's future revenue from the bottom-up. Compared to the top-down prediction, this method of predicting TSMC's revenue based on capex and capacity is much higher, and in 2025, it's about 50% higher than the original prediction. Considering the mass production of 2nm in 2025, which will further increase wafer prices, the actual revenue might be even higher than our current calculations.
ASML
Of course, whether TSMC can complete such an expansion plan depends on the production capacity of EUV lithography machines. To convert wafer production into the number of lithography machines, some knowledge of EUV processing technology needs to be added.
Firstly, the highest precision of a lithography machine in a single exposure is about one-quarter of its wavelength divided by numerical aperture. Therefore, for an ArF lithography machine with a wavelength of 193nm and a dry system (numerical aperture=1), the precision that can be processed in a single exposure is 48nm, while wet ArF can achieve 35nm. Then, through multi-patterning, smaller spacing can be achieved, but the disadvantage is that the process becomes more complex (lithography and etching need to be repeated several times), and what could have been done in one step now requires double or triple patterning, resulting in lower yields. This can increase the precision to 10nm, but the process becomes too complex and yields become too low for processes below 10nm, so it is best to use EUV lithography machines.
The wavelength of EUV is 13.5nm, and the numerical aperture is 0.33, so the precision of a single exposure is 10nm, and through multi-patterning, 3nm can be achieved, so 2nm requires the next generation of lithography machines with a numerical aperture of 0.55.
In addition, there are many layers in a chip, and the number of layers processed by the lithography machine is also increasing. The number of layers multiplied by the number of multi-patterning exposures is the total number of exposures required for one wafer. Based on ASML's disclosures and expert interviews, we expect the two data points to be as follows：
According to ASML, the number of wafers that can be processed per day by an EUV lithography machine is approximately 2000, and it is expected to reach 3000 wafers in 25 years.
Source：ASML
Based on this, we can calculate the number of EUV lithography machines required. For example, for a factory with a monthly production capacity of 45k 5nm wafers, the number of lithography machines required is 45k/30 days * 21 exposures / 2k = 15.75, which is rounded up to 16 machines.
Using the wafer production capacity of each TSMC process calculated earlier and comparing it with ASML's EUV lithography machine shipments, we have calculated the number of EUV lithography machines TSMC needs. Since it takes one year for a factory to reach maximum capacity from the start of operation, the lithography machines purchased by TSMC in 2022 will not reach maximum capacity until 2023. Therefore, we calculated the proportion of lithography machines purchased by TSMC by dividing the number of new lithography machines in TSMC in 2023 by ASML's shipments in 2022 and found that it is steadily increasing. By 2025, TSMC's EUV installed base will reach 166 machines, with at least 39 new installations (not considering the 2nm process). Therefore, we believe that it is still possible for ASML to achieve a shipment volume of 85 EUV lithography machines by 2025.
In conclusion, our calculations show that TSMC's increased production capacity in advanced processes can meet user demand and its revenue growth rate can increase by 25% or more from the bottom up, and this growth rate will not be constrained by the shipment volume of EUV lithography machines.
Finally, since many of the data points are based on expert interviews or our own assumptions, there may be omissions or inaccuracies. We welcome readers to point them out and welcome discussions with us.
Disclaimer: This article does not serve as our recommendation or advice regarding the mentioned companies.
Kommentare