Yield rate comparison of TSMC, Samsung, Intel’s advanced process

Yield rate

Why talk about yield rate and advanced processes? Because of the consolidation in semiconductors, few semiconductor companies have their own factories for manufacturing. For this part, please refer to the description of my other blog article “6 Common Semiconductor Investment Myths“. In addition, chip functions are becoming more and more powerful and complex, making it necessary to have more advanced manufacturing techniques to meet the requirements of chip designers on chip performance design.

But the problem is that with both technical ability and capital, there are few foundries that can meet the above-mentioned so-called requirements of chip designers on chip performance design. At present, only TSMC (ticker: TSM), Samsung, and Intel (ticker: INTC) are left with this ability. But Intel has been overwhelmed in recent years; therefore, only TSMC and Samsung can provide high-end wafer foundry services at present.

Advanced process

What is advanced process?

At present, the industry generally simply uses the 16-nanometer process as the boundary, below 16-nanometer process will be advanced process. One of the main reasons is that in addition to TSMC, Samsung, and Intel, other wafer foundries (mainly UMC, Globalfoundries, SMIC) under various factors and considerations (including technology, capital, embargo), all stay on the 14nm process node.

There is no fixed node definition for advanced processes. 7-8 years ago, 14nm was considered an advanced process, but with the evolution of time and the maturity of technology and cost reduction, few people now regard 14nm as an advanced process. In terms of current chip manufacturing technology, 12nm (included) and below are considered advanced processes. But the most conservative statement is that at present, there is no dispute that the node process technology below 10 nanometers (included) is an advanced process.

Barrier to entry too high, what are the barriers?

Factory cost

Each factory needs at least tens of billions of dollars, which is the lowest basic figure, so as the process technology improves and inflation increases year by year. With tens of billions of dollars alone, not many listed companies have this capability. After the construction is completed, the semiconductor materials and equipment need to be calculated separately, as well as annual maintenance fees and regular upgrade fees. This pile adds up to a huge pressure on the capital investment of a listed company.

Spend time

It will take at least three to five years for everything to go smoothly from the start of the plant to the commercial mass production. Semiconductors are a cyclical industry. After the factory is built, demand begins to slow down.

Political Factors

SMIC in mainland China, most people know that it has talent, capital, and market, plus customer orders, all meet the perfect conditions for pursuing advanced manufacturing processes. However, in the reality that Western countries led by the United States are afraid that China will surpass the Western world and implement an embargo on key semiconductor equipment, SMIC’s 7-nanometer advanced manufacturing process has been delayed for several years and cannot be mass-produced. As CNBC’s report said: “China is pushing to develop its own chips — but the country can’t do without foreign tech

Only three are able to

The entry barrier for advanced processes is too high, and almost most wafer foundries have announced that they will no longer pursue advanced processes and only provide foundry services for mature processes with lower costs. However, UMC (ticker: UMC) recently said that it is “assessing” whether to re-enter the advanced process because of the hot wafer foundry market.

At present, there are only three companies, TSMC, Samsung, and Intel, that have the ability to provide advanced manufacturing processes—there are many reasons, and we will discuss them later.

TSMC monopolizes advanced process market

I have shown a picture in 2-4 of my book “The Rules of Super Growth Stocks Investing”. According to the latest information, TSMC monopolizes more than 75% of the world’s wafer foundry “advanced process” market. The foundry profit of advanced processes is much higher than that of mature processes, which is easy to understand. Even more frightening, customers can’t find an alternative.

Samsung Electronics fails to catch

Some readers may disagree and say, isn’t there still Samsung? How can there be no other alternative. Samsung is very ambitious, with the support of the state, its own semiconductor technology strength, the huge capital and resources of the Samsung Group, and the strong ecosystem of South Korean semiconductors; it is indeed the most powerful opponent of TSMC for a long time. Most people have forgotten that it was only 7-8 years ago that Samsung originally surpassed TSMC in terms of market share and technical strength in wafer foundry and advanced semiconductor processes.

Dilemma on a non-technical level

Samsung Electronics boldly announced three years ago that it would become the global leader in the system semiconductor industry by 2030, but now it suffers from slow growth in business such as chip processing and foundry, and important decisions are also due to actual control. The in-charge chaiman of the company, as Nikkei a reported:”The trials of Samsung: Vice Chairman Lee’s legal troubles could threaten tech dynasty“.

A five-year ban by South Korea’s Justice Ministry, Lee Jae-yong cannot return to Samsung Electronics’ management until 2027. All major plans, key decisions, major capital investments, and mergers and acquisitions of Samsung Electronics have all been suspended because of the lack of leaders.

Technical dilemma

However, Samsung is currently encountering many problems in the advanced proces. You can refer to the discussion in 3-3 of my book “The Rules of Super Growth Stocks Investing”, and you will know the many cases of clients who have suffered losses mentioned in it.

Intel aggressively catches up

Intel’s ambition

Intel intends to surpass TSMC in the manufacturing capabilities of advanced processes in the next 4-5 years. But due to poor past records again and again. Therefore, even though the new CEO re-emphasized Intel’s ambitious plan to surpass TSMC last month, the response did not seem to be very enthusiastic.

Future plans, Intel first, Samsung second, TSMC conservative

According to the current “respectively disclosed” plans of the three companies for future advanced process development: Intel is first, Samsung is second, and TSMC is the most conservative. But this is their own plan. As for whether it will come true as planned in the end, and how high the chance of it will come true, no one can say for sure.

I suggest readers to take a look at the plans of the three companies. There is a table in my blog post “Comparison of TSMC, Intel, and Samsung’s new process roadmaps for future chip“, which lists these three companies from the past to the future before 2025; And the time course of each company from the current process to the next 2nm.

Advanced process yield figures

The figure of advanced process yield Samsung’s advanced process yield is very poor, and it is not on the same level as TSMC. Perhaps we should say that TSMC is too good. It is a rare ability to compare the yield rate of advanced processes with the yield rate of mature TSMC processes.

TSMC’s yield rate

For example, TSMC’s 5-nanometer yield has risen from 50% to 80% in just a month after mass production, the 7-nanometer trial production rate is over 70%, and the 4-nanometer yield is 70%.

But for the 3nm part, the media has repeatedly revealed that TSMC’s 3nm yield still has a lot of room for improvement. TSMC originally planned to mass-produce semiconductors for Intel and Apple with 3nm technology starting in July, but it has been unable to achieve the desired yield level. This can also be used to explain why the A15 Bionic SoC processor of Apple’s iPhone 13 in 2021 is still using TSMC 5nm!

Samsung’s yield rate

Samsung’s 4nm yield rate has improved substantially from 35% to nearly 60% in the mid-2022.

3nm is only 30% at the highest. In April 2022, it was reported that Samsung’s GAA-based 3nm process yield was only between 10% and 20%, which was much lower than expected.

Intel’s yield rate

In July 2020, Intel announced the second quarter 2020 financial report. The financial report revealed that due to the unsatisfactory 7nm process yield, Intel’s 7nm CPU products were delayed by about 6 months compared with previous expectations. This is Intel’s typical answer to the process yield rate, we have nowhere to know the exact number. The outside world only knows that the yield rate is not good, but Intel never released the actual number.

The Importance of Yield to Wafer Manufacturing

Simply put, you can think of it this way: Yield equals profit!

Price speaks

What is the price of semiconductor foundry?

At present, the foundry price of advanced process wafers ranges from 7,000 to 15,000 US dollars, and the average price of mature process wafer foundries is about 3,200 US dollars.

Yield rate

TSMC has price power

My personal analysis believes that this has the most obvious impact on profits. This is why TSMC dared to announced in 2021 without any warning, it suddenly announced a 20% increase in foundry fees and implemented it immediately. And in May 2022, it was announced that the price will be increased by 5% to 8% from 2023 — This is the competitive “price power” that few companies can have.

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