TSMC to Build Specialty Fab in Japan to Address Local Demand

Taiwan Manufacturing Semiconductor Co. confirmed on Thursday (via Bloomberg) that it would build its first semiconductor manufacturing facility in Japan. The fab will produce specialty chips using mature and specialty process technologies, which is expected to improve supply of components to local clients, including automakers. This means that its fabs outside of Japan (read in Taiwan and China) will be able to allocate more capacity for various PC applications. 

"After conducting due diligence, we announce our intention to build a specialty technology fab in Japan, subject to our board of directors approval," said CC Wei, chief executive officer of TSMC, at the conference call with investors and financial analysts. "We have received a strong commitment to support this project from both our customers and the Japanese government." 

TSMC's semiconductor production facility in Japan will process wafers using various 28 nm-derived fabrication processes, which includes numerous 28 nm nodes as well as 22ULP node for ultra-low-power applications. These manufacturing technologies are outdated for applications like smartphone system-on-chips (SoCs) and high-performance CPUs or GPUs, but they are good enough for chips used by automotive and consumer electronics industries and will be sufficient for years to come as many ICs have a long lifecycle. TSMC will begin construction of the fab in 2022 and expects its to start operations in late 2024. 

"This fab will utilize 20 nm to 28 nm technology for semiconductor wafer fabrication," Wei added. "Fab construction is scheduled to begin in 2022 and production is targeted to begin in late 2024, further details will be provided subject to the board approval."  

The world's largest foundry is expanding beyond Taiwan both because of surging demand for chips and because of geopolitical situation. Rumors about TSMC's intentions to build a specialty fab in Japan have been floating for months and in July the company confirmed that it had initiated a due diligence on a specialty fab in Japan. In the past few month the company evaluated the needs of its clients in Japan (such as Sony, NXP, Renesas, etc.), build up costs, and operating efficiency and concluded that it makes sense to build a fab in Japan, the company said on Thursday. 

TSMC is already building an R&D center in Japan and collaborates with the University of Tokyo in various areas. With good local ties, it is natural for TSMC to expand its presence in Japan with a manufacturing facility. 

Right now, TSMC does not disclose planned capacity or cost of the fab. It also neither confirms nor denies any involvement of Sony and the Japanese government in the project. Late last week Nikkei reported that TSMC planned a huge specialty fab in Japan with an estimated cost of about $7 billion. The agency said that the authorities would invest as much as half of the fab cost, whereas Sony would take a minority stake. The production facility would be located near Sony's image sensor fab in Kumamoto Prefecture on land owned by the electronics giant, according to Nikkei.