[Chiptok] Rapid Growth of '3-Nano Semiconductor'... Next-Generation Transistor War

TSMC Q4 Last Year Revenue 625.5 Billion TWD
Global Foundry Market Recovery Expected This Year
Confidence Shown as Demand for 3nm Leading-Edge Process Increases

Samsung Electronics and TSMC Focus on Improving 3nm Technology
Samsung Electronics Seeks GAA Opportunity Amid TSMC's Lead
"Samsung Electronics to Achieve 24% Foundry Market Share by 2028"

Taiwanese foundry (semiconductor contract manufacturing) company TSMC recently announced in its earnings report that its fourth-quarter revenue last year was 625.53 billion New Taiwan dollars, maintaining the same level as the previous year. Net profit decreased by 19.3% during the same period to 238.71 billion New Taiwan dollars.

What caught attention in the rather average earnings report was the share of the 3-nanometer (nm; 1 nm is one billionth of a meter) process. The previously nonexistent 3 nm share rose to 15%. With the emergence of 3 nm (15%) alongside the previously dominant 7 nm (17%) and 5 nm (35%) advanced processes, TSMC's share of processes below 7 nm increased to 67%. As the semiconductor market shows signs of recovery this year, the era of 3 nm is rapidly approaching.

This trend is also confirmed by statements from C.C. Wei, TSMC's Chief Executive Officer (CEO). At the earnings announcement, he said, "This year, we expect steady growth driven by the continuous and strong expansion of industry-leading 3 nm technology, strong demand related to 5 nm technology, and AI-related demand."

Foundry Market Recovery Driven by 3 nm Growth

TSMC is confident about its performance recovery this year. CEO Wei predicted that the overall semiconductor market, excluding memory semiconductors, will grow by 10%, with the foundry market expected to grow by 20%. TSMC anticipates its own revenue to increase by more than 20% next year in line with this foundry market growth.

Other market forecasts are also positive. Market research firm IDC expects the foundry market size to reach $124.5 billion this year, an 18.2% increase from last year. It also projects that the foundry market will grow by 19.7% in 2025, marking the start of a full-fledged upcycle. Additionally, the Semiconductor Equipment and Materials International (SEMI) forecasts that foundry production capacity will increase by 9.68% to 10.2 million wafers per month this year, up from 9.3 million wafers per month last year.

Samsung Electronics and TSMC Compete in 3 nm

The semiconductor industry is paying close attention to the possibility of intensified competition between TSMC and Samsung Electronics as TSMC expands its 3 nm process amid market recovery this year. TSMC is mass-producing Apple's latest mobile application processors (AP) using the 3 nm process, increasing the related revenue share. Samsung Electronics began 3 nm mass production in June 2022 and has been expanding its customer base, including server chip clients. Both companies are upgrading their 3 nm process technology (from 1st generation to 2nd generation) and striving to improve yield (the ratio of good products to total manufactured products).

Market research firm Omdia forecasts that the foundry market for processes below 3 nm will grow from $21.62 billion this year to $38.18 billion by 2026. It also expects the compound annual growth rate (CAGR) of the foundry market below 3 nm to reach 65.3% from 2023 to 2026. The share of processes below 3 nm in total foundry revenue is also expected to increase to 24.4% by 2026. This explains why Samsung Electronics and TSMC are busy competing to gain an advantage in the 3 nm era.

Currently, the market consensus is that TSMC, the leading foundry company, is ahead of Samsung Electronics in the 3 nm competition. Samsung Electronics is enhancing its next-generation transistor structure technology called Gate-All-Around (GAA) to narrow the gap with TSMC. GAA is a structure that increases the contact surfaces between the transistor gate (the door through which current flows) and the channel (the path of current flow) to four. Compared to the existing FinFET structure, GAA offers faster data processing speeds and higher power efficiency, making it a game changer in the foundry industry.

Samsung Electronics and TSMC Accelerate Preparation for 2 nm Era

Samsung Electronics introduced GAA technology first alongside its 3 nm mass production in June 2022. In contrast, TSMC is currently mass-producing the 3 nm process based on FinFET. TSMC plans to apply GAA technology when it begins 2 nm process mass production in 2025. Since Samsung Electronics adopted GAA earlier than TSMC, it expects to narrow the gap with TSMC once the 2 nm era fully begins.

The market shares a similar outlook. Dongwon Kim, a researcher at KB Securities, said, "Currently, Samsung's foundry technology is 1 to 2 years behind TSMC in advanced processes (3 to 4 nm), but the 2 nm process scheduled for mass production in 2025 will gradually reduce the gap with TSMC." He also predicted, "Samsung's foundry market share, with the advantage of 2 nm GAA process next year, will double from 12% last year to 24% by 2028 in five years."

Samsung Electronics is preparing for 2 nm process mass production next year, focusing on mobile products beyond 3 nm. In 2026, it plans to expand mass production to high-performance computing (HPC), and in 2027 to automotive sectors. The company explains that introducing the 2 nm process will improve chip performance by 12% compared to the 2nd generation 3 nm process while reducing power consumption and area by 25% and 5%, respectively.

TSMC will begin installing related equipment at its Baoshan plant in the Hsinchu Science Park in northern Taiwan starting in April to prepare for 2 nm mass production next year. According to Taiwanese media, TSMC is also expected to introduce additional 2 nm process-based production facilities in the Gaoxiong region in southern Taiwan.