According to analyst firm ICinsights, keeping pace with cutting-edge IC technology has become increasingly expensive over the past 25 years. Now, the investment required to implement state-of-the-art process technology for logic devices has driven most of the companies out of the market, leaving only Samsung, TSMC and Intel. And of the three manufacturers, only two can really lead the pack, and that is Samsung and TSMC.
From the status quo, they can both mass produce 7nm and 5nm ICs. In contrast, Intel is not expected to mass-produce 7nm devices in its own manufacturing plants until 2022, when Samsung and TSMC are expected to have rolled out 3nm process technology to produce ICs in commercial quantities.
Historically, IC companies with the highest levels of capex are also the ones capable of producing the most advanced chips. Although Intel has been among the top two capital spenders in the semiconductor industry for 25 consecutive years over the past 27 years (Figure 1), the company’s spending in 2020 is only about half what Samsung spent that year, and it is expected to once again Far less than half of what Samsung spends. Samsung and TSMC are expected to spend about $28 billion each this year.
In 2010, Samsung’s semiconductor capital expenditures exceeded $10 billion for the first time. In 2016, companies spent $11.3 billion on semiconductor capital expenditures, and then in 2017 Samsung Semiconductor Group more than doubled its spending to $24.2 billion.
Samsung’s semiconductor capital spending has been very strong since 2017, with spending reaching a staggering $21.6 billion in 2018, $19.3 billion in 2019, and $28.1 billion last year. Samsung’s sprawling 2017-2020 spending ($93.2 billion) in the history of the semiconductor industry Although Samsung has yet to provide guidance for its 2021 spending, IC Insights estimates that the company’s spending will be roughly in line with 2020.
TSMC is the only pure-play foundry that offers leading-edge technology. It has very strong demand for its 7nm and 5nm processes, which accounted for 47% of its 2H20 sales. Most of its current investments are in additional capacity for its 7nm and 5nm technologies.
TSMC’s 5nm products accounted for 8% ($3.5 billion) of total sales in 2020, which speaks to how quickly TSMC moved to more advanced processes last year, as the company basically had no 5nm revenue in the first half of last year.
It now appears that both Samsung and TSMC are aware of the once-in-a-lifetime opportunity ahead.
Samsung started a spending surge in 2017, and TSMC is also set to start a massive multi-year spending increase in 2021. ICInsights expects Samsung and TSMC to spend at least $55.5 billion in capital spending this year, or 5 percent of total spending. The top two spending times were high percentages of total semiconductor industry spending (Figure 2).
With no other company currently able to match these massive spending, Samsung and TSMC are likely to distance themselves and rivals further this year in advanced integrated circuit manufacturing technology.
Can governments like the EU, US and China invest in their homegrown IC industry and catch up with the IC technology race with Samsung and TSMC?
Given the wide gap, IC Insights believes that governments will need to spend at least $30 billion annually for at least five years to have a reasonable chance of success. Do they have the will and/or ability to deliver on this promise?
Also, for China, even if it had money, it would certainly be hampered by trade issues that prohibit the sale of some of the most critical process equipment to China.
Without swift and decisive action from other IC manufacturers or governments, Samsung and TSMC would have succeeded in capturing the world’s leading IC process technology, the cornerstone of future advanced consumer, commercial and military Electronic systems.