Chips are the core of contemporary science and technology, and they are also the focus of international competition. In the field of chip manufacturing, TSMC is undoubtedly the global leader and has achieved mass production of 3nm, while its competitors Intel and Samsung are still struggling to catch up.
However, TSMC is facing an embarrassing situation: its 7nm chip is unexpectedly useless, so it can only be forced to cut prices and grab orders. Why is that?
The change in demand in the chip market is one of the main reasons why TSMC's 7nm chips are difficult to sell. With the development of technologies such as 5G, artificial intelligence, and the Internet of Things, there are more and more application scenarios for chips, and the requirements for chip performance, power consumption, and cost are getting higher and higher. As a result, chip manufacturing processes are shrinking to improve integration and efficiency.
At present, the state-of-the-art chip process has reached 3nm, and the 7nm process has been regarded as an outdated technology. According to TSMC's financial report1, in the third quarter of 2023, TSMC's revenue from 7nm and below processes accounted for 58%, of which 5nm processes accounted for 18% of revenue, while 7nm processes accounted for 40% of revenue.
In comparison, in the third quarter of 2022, TSMC's 7nm and below processes accounted for 60% of revenue, of which 5nm processes accounted for 8% of revenue, while 7nm processes accounted for 52% of revenue. It can be seen that the revenue proportion of TSMC's 7nm process has decreased by 12 percentage points in one year, while the revenue proportion of the 5nm process has increased by 10 percentage points.
This shows that the market demand for the 7nm process is rapidly decreasing, while the demand for the 5nm process is growing rapidly.
TSMC's strategic choice is also one of the main reasons why TSMC's 7nm chips are difficult to sell. TSMC's strategy has always been to pursue technological leadership, and continue to invest in R&D and build factories to meet the needs and expectations of customers. TSMC founder Zhang Zhongmou once said: "Our goal is to become the best wafer foundry in the world, not the largest." ”
TSMC's strategy has enabled it to maintain an absolute advantage in the field of chip manufacturing, and has also won the favor of the world's top chip design companies such as Apple, Qualcomm, and NVIDIA. However, TSMC's strategy also has a *** that its production capacity is often in short supply, resulting in customer orders being unable to be delivered in time.
According to ** report, TSMC's 5nm process capacity has been monopolized by Apple, and other customers can only wait in line or switch to other processes. The production capacity of TSMC's 3nm process has also been booked by customers such as Apple and Qualcomm, and it is expected to be mass-produced in 2025.
This means that customers of TSMC's 7nm process will have to wait a long time if they want to upgrade to a more advanced process, or turn to other foundries, such as Samsung, SMIC, etc. This adversely affected sales of TSMC's 7nm process.
TSMC's competitive environment is also one of the main reasons why TSMC's 7nm chips are difficult to sell. Although TSMC is far ahead in the field of chip manufacturing, it is not without competitors. In the 7nm process market, TSMC's biggest competitor is Samsung. Samsung is the world's second-largest wafer foundry and the world's largest memory chip manufacturer.
Samsung's technical level on the 7nm process is comparable to TSMC, and it also uses EUV lithography technology. Samsung's advantage is that it has its own chip designs and applications, such as mobile phones, tablets, TVs, etc., which can be self-sufficient and can also serve other customers. Samsung's disadvantage is that it has low production capacity and is unable to supply chips to Chinese customers such as Huawei due to U.S. export restrictions.
Samsung's market share in the 7nm process is about 18%, far lower than TSMC's 80%. However, Samsung has not given up on the challenge of TSMC, and it is increasing its investment in 5nm and 3nm processes in an attempt to close the gap with TSMC. Samsung is also reducing the 7nm process** to attract more customers.
According to reports, Samsung has managed to snatch some of Nvidia's orders from TSMC, becoming Nvidia's second-largest foundry. This also puts pressure on sales of TSMC's 7nm process.
The reason why TSMC's 7nm chips are not used and forced to cut prices and grab orders is due to many factors such as changes in demand in the chip market, TSMC's strategic choice and competitive environment. TSMC's 7nm process has lost its market advantage and is facing the loss of customers and the challenges of competitors.
If TSMC wants to continue to maintain its leading position in chip manufacturing, it must accelerate the development and production of more advanced processes to meet customer needs and expectations, and at the same time, it must also rationally allocate production capacity to avoid imbalances between supply and demand, resulting in customer dissatisfaction and losses. TSMC's 7nm chip may only be a transitional stage, and the chip war in the future will be more intense.