TSMC Achievements

In 2014, TSMC maintained its leading position in the total foundry segment of the global semiconductor industry, with an estimated market segment share of 54%. TSMC achieved this result amid intense competition from both established players and relatively new entrants to the business.

Leadership in advanced process technologies is a key factor in TSMC’s strong market position. In 2014, 42% of TSMC’s wafer revenue came from manufacturing processes with geometries of 28nm and below.

With TSMC’s focus on customer trust, the Company strengthened its Open Innovation Platform® (OIP) initiative in 2014 with additional services. During the 2014 Open Innovation Platform® Ecosystem Forum, the Company revealed 16nm FinFET Plus Reference Flow (both full-chip and IP Design), to highlight the success of design enablement through OIP. The OIP Ecosystem Forum, which was held October 2014 in San Jose, California, was well attended by both customers and ecosystem partners to demonstrate the value of collaboration through OIP to foster innovations.

TSMC offers the foundry segment’s widest technology portfolio and continues to invest in advanced technologies and specialty technologies, which is a key differentiator from our competitors and provides customers more added value.

Technologies that the Company either developed or rolled out in 2014 include:

Advanced Technology

• 10nm FinFET technology is under development to keep TSMC’s technology leadership position in the industry. It is expected to be ready for risk production in the fourth quarter of 2015. 10nm FinFET can provide the best density/cost benefit with the desired speed/power performance to meet customers’ expectations. It can serve customers from all different applications, such as APU (Accelerated Processing Unit), CPU (Central Processing Unit), FPGA (Field-Programmable Gate Array), GPU (Graphics Processing Unit), Networking and mobile computing applications, including smartphones, tablets and high-end SoC devices.
• 16nm FinFET Plus technology (16FF+) passed full reliability qualification on-schedule in the fourth quarter of 2014. This enhanced version of TSMC’s 16FF technology operates 40% faster than planar 20nm System-on-Chip technology (20SoC) or consumes 50% less power at the same speed. It offers customers a new level of performance and power optimization targeted at the next generation of high-end mobile computing, networking, and consumer applications.
• 20nm System-on-Chip technology entered production with smooth ramping and stable yield performance. It provides better density and power value than 28nm by introducing advanced patterning technique for both performance-driven products and mobile computing applications migration.
• 28nm High Performance (28HP) technology for performance-driven markets like CPU, GPU, APU, FPGA and high-speed networking applications.
• 28nm High Performance Mobile Computing (28HPM) technology for tablets, smartphones, SoC applications with outstanding performance.
• 28nm High Performance Compact Mobile Computing (28HPC) technology for mainstream smartphones, DTV, Storage and SoC applications. 28HPC enables circuit design to use smaller die size, less over-design and extraordinary power reduction with excellent process control and optimized design rules.
• 28nm Low Power (28LP and 28HPL) and RF (28HPL-RF and 28LP-RF) technology for entry-level smartphones, application processors, tablets, home entertainment and digital consumer applications.
• 40nm general purpose (40G) technology for performance-driven markets like CPU, GPU, FPGA, HDD, Game Console, Network Processor and Gigabit Ethernet applications.
• 40nm Low Power (40LP and 40LP+) and RF technology for smartphones, DTV (Digital Television), STB (Set-Top-Box), game and wireless connectivity applications.
• 40nm ultra-low power technology is under development. It is expected to be ready for production in 2015. It can serve customers from Internet of Things (IoT) and wearable devices related applications, such as wireless connectivity, wearable AP, and sensor hub applications.
• Compared to 55nm Low Power (55LP) process, TSMC’s 55nm Ultra-Low Power (55ULP) process can further reduce operating voltages by 20% to 30% to lower both active power and standby power consumption and to enable significant increases in battery life by 2 to 10 times. In addition, 55ULP integrates RF and EmbFlash to enable customers’ SoC designs.

Specialty Technology

• 28HPM passed automotive grade qualification and entered risk production for automotive applications.
• 40nm eFlash is under development for general offerings. Solution will be ready in the second half of 2015 for applications such as high endurance security MCU, wireless MCU, high performance MCU, etc.
• 55nm eFlash technology is in production for such applications as FPGA, general purpose MCU, etc.
• 55nm Ultra-Low Power (ULP) eFlash is under development and will be available in early 2015 for battery-powered applications like wireless MCUs, IoT, wearable devices, and general-purpose MCUs.
• 55/65/90nm customized eFlash technologies were all qualified and entered production for automotive applications.
• 55nm high voltage process entered production with the industry’s smallest SRAM bit cell offering to support narrow border design of Super Retina display driver IC for high-end mobile phones.
• 65nm TSI CIS (TSMC Stacked Illumination CMOS Image Sensor) technology was fully qualified, and is ready for customer tape-outs in the first quarter of 2015.
• 0.13-micron BCD process is ready for production on both 8” and 12” wafers. This process is expected to extend qualification for automotive AEC-Q100 Grade-0 in the first half of 2015.
• 0.18μm BCD second generation entered into production with multiple products from multiple customers. The technology also passed automotive process qualification criteria. It offers worldwide competitive power LDMOS Rds(on) performance with wide voltage spectrum from 6V to 70V for multiple applications in Computing, Communication, Consumer, wearable devices and automotive markets.
• 0.18μm eFlash technology is ready for 18V device integration for analog-intensive applications such as touch screen controllers.
• 0.5μm GaN on Silicon 100V Enhancement Mode HEMT process was qualified for power discrete applications. 650V GaN on Silicon processes are expected to be qualified in 2015. GaN-on-Silicon technology offers the values of less conduction and switching loss for energy efficient power delivery.
• 28HPC with 5V LDMOS is available for high precision analog products with amplifiers integrated.
• Successfully produced the world’s smallest CMOS-MEMS monolithic accelerometer for customers.

Market Overview

TSMC estimates that the worldwide semiconductor market in 2014 reached US$354 billion in revenue, a 10% growth compared to 2013. Total foundry, a manufacturing sub-segment of the semiconductor industry, generated total revenues of US$42 billion in 2014, or 14% YoY growth.

Industry Outlook, Opportunities and Threats

Industry Demand and Supply Outlook

Following 11% growth in 2013, the foundry segment again posted double-digit growth, to 14% in 2014, mainly driven by fabless market share gains over IDM and by process technology advancement.

TSMC forecasts total semiconductor market to grow mid single digit in 2015. Over the longer term, due to increasing semiconductor content in electronics devices, fabless companies’ continuing market share gains, and increasing in-house Application-Specific Integrated Circuits (ASIC) from system companies, foundry segment revenue growth is expected to be much stronger than the projected 4% compound annual growth rate (CAGR) for the total semiconductor industry from 2014 through 2019.

As an upstream supplier in the semiconductor supply chain, the condition of the foundry segment is tightly correlated with the market health of the 3Cs: communications, computer and consumer.

● Communications

The communications sector, particularly the handset segment, posted a modest 4% growth in unit shipments for 2014. Smartphones, which have much stronger 25% growth and higher semiconductor content, have been leading the growth of the sector.

The continuing transition to 4G/LTE and LTE-Advanced handsets will bring double digits growth to the market. Smartphones with increasing performance, lower power and more intelligent features continue to propel buying interest for new handsets in 2015. The growing popularity of mid- to low-end smartphones in emerging countries is also a new catalyst driving the growth of the sector.

Low power IC is an essential requirement among handset manufacturers. The SoC design for more optimized cost, power and form-factor (i.e. device footprint), plus the appetite for higher performance to run complicated software, will continue to accelerate the migration to advanced process technologies in which TSMC is already the leader.

● Computer

The computer sector’s unit shipments dropped 1% YoY in 2014, after a 10% decline in 2013. Slowing decline was driven by replacement cycles, Windows XP expiration, and the slowdown in tablet sales.

The personal computer (PC) market is expected to decline low to mid single digit in 2015, with increasing variety (e.g. Convertible, Ultrabook and Chromebook), the introduction of new operating systems, and consumer replacement expected to stimulate PC demand.

Requirements of lower power, higher performance and integration for key computer components such as CPU, GPU, Chipset, etc., should drive product design demand for leading process technologies.

● Consumer

The consumer sector’s unit shipments declined 3% in 2014, as growth from TV game console and set-top-boxes was offset by the decline on digital cameras, MP3 players, and handheld game consoles, as well as the result of smartphone cannibalization.

Consumer electronics will be flat to slightly decline in 2015. The 4K UHD TVs will also continue the high growth within the otherwise flattening TV market in 2015. TSMC will be able to capitalize on these trends with advanced technologies for 4K UHD TV market.

Supply Chain

The electronics industry consists of a long and complex supply chain, the elements of which are highly dependent and correlated with each other. At the upstream IC manufacturing level, it is important for IC vendors to have sufficient and flexible supply to support the dynamic market situation. The foundry vendors are playing an important role to ensure the health of the supply chain. As a leader in the foundry segment, TSMC provides leading technologies and large-scale capacity to complement the innovations created along the downstream chain.

TSMC Position, Differentiation and Strategy

Position

TSMC is the semiconductor foundry leader for both advanced and specialty process technologies. As a result, the Company commanded a 54% market share in 2014. In terms of TSMC’s net revenue geographic distribution, 69% came from North America; 13% from the Asia Pacific region, excluding China and Japan; 7% from China; 6% from Europe; and 5% from Japan. By end product application, 10% of TSMC’s net revenue came from the computer sector, 59% from communications, 10% from consumer products, and 21% from industrial and standard products.

Differentiation

TSMC’s leadership position is based on three defining strengths and a business strategy rooted in the Company’s heritage. TSMC distinguishes itself from the competition through its technology leadership, manufacturing excellence and customer trust.

As a technology leader, TSMC is consistently first among dedicated foundries to develop next-generation leading-edge technologies. The Company has also established its technology leadership on more mature technology nodes by applying the lessons learned on leading-edge technology development to enrich its specialty technologies to more advanced process nodes. Beyond process technology, TSMC has established front-end and back-end integration capabilities that result in faster time-to-production and creates the best power, performance and area sweet spot.

TSMC has gained manufacturing acclaim for its industry-leading management, and is extending that leadership through its Open Innovation Platform® and Grand Alliance initiatives. The TSMC Open Innovation Platform® initiative hastens the pace of innovation among the semiconductor design community, its ecosystem partners and TSMC’s IP, design implementation and design for manufacturing capabilities, process technology and backend services. A key element is a set of ecosystem interfaces and collaborative components initiated and supported by TSMC that more efficiently empower innovation throughout the supply chain and that drive the creation and sharing of newly created revenue and profits. The TSMC Grand Alliance is one of the most powerful forces for innovation in the semiconductor industry, bringing together customers, electronic design automation (EDA) partners, IP partners, and key equipment and materials suppliers at a new, higher level of collaboration. Its objectives are to help customers, the alliance members and TSMC win business and stay competitive.

The foundation for customer trust is a commitment TSMC made when it first opened for business over a quarter century ago: to never compete with our customers. As a result, TSMC has never owned nor marketed a single semiconductor product design, but rather has focused all of its resources on becoming the trusted foundry for our customers.

Strategy

TSMC is confident that its differentiating strengths will enable it to leverage the foundry segment’s attractive growth opportunities. TSMC has invested heavily in leading-edge 20nm System-on-Chip technology (20SoC) and 16nm FinFET Plus (16FF+) technologies. 20SoC technology entered the production stage with smooth ramping and stable yield performance. 16FF+ technology passed full reliability qualification on schedule in the fourth quarter of 2014, and is expected to begin volume ramp around July 2015. Also, the even more leading 10nm technology is under development and on track to start risk production in the fourth quarter of 2015. TSMC maintains technology leadership by collaborating in the development process through early engagement and technology definition that provides a smooth transition for TSMC’s advanced technology customers. At the same time, the Company maintains its leadership in specialty technologies by broadening its offerings and expanding their integration into more advanced process nodes.

Numerous other efforts to ensure manufacturing excellence through product grade enhancements and manufacturing technology innovation are underway.

To address challenges inherent in the electronic product life cycle and increased competition from other semiconductor manufacturing companies, TSMC continually strengthens its core competitiveness and deploys both short-term and long-term technology and business development plans to meet Return on Investment (ROI) and growth objectives.

● Short Term Semiconductor Business Development Plan

• Substantially ramp the business and sustain advanced technology market share through increased capacity investment.
• Maintain mainstream technology market share by expanding business into new customers and market segments with off-the-shelf technologies.
• Further expand TSMC’s business and service infrastructure into emerging and developing markets.

● Long Term Semiconductor Business Development Plan

• Continue developing leading-edge technologies consistent with Moore’s Law.
• Broaden specialty business contributions by further developing derivative technologies.
• Provide more integrated services, covering system-level integration design, design technology definition, design tool preparation, wafer processing, and backend services, that deliver more value to customers through optimization solutions.