TSMC and Google push chipmaking boundaries with 3D ‘stacking’

By Cheng Ting-Fang and Lauly Li, Nikkei staff writers – Taiwanese chip titan testing new production tech to boost computing power.

Taiwan Semiconductor Manufacturing Co. is working with Google and other U.S. tech giants to develop a new way of making semiconductors more powerful.

The industry’s traditional approach of cramming ever more transistors onto a single chip is starting to lose steam. In response, the world’s largest contract chipmaker is focusing on chip packaging — a little-known part of the process of making semiconductors but one that is becoming an industry battleground.

Chip packaging is one of the final steps in the chipmaking process, in which semiconductors are mounted into a supportive case before being placed on a print-circuit board. It was long regarded as less technologically demanding than chip manufacturing.

But as the pace of chip development, known as Moore’s Law, has slowed — as it becomes more difficult to shrink the space between transistors and thus fit more onto a chip — the way they are packaged has come to the fore.

TSMC is now taking chip packaging vertically and horizontally, using a new 3-D technology that it dubs SoIC. It makes it possible to stack and link several different types of chips — such as processors, memory and sensors — into one package, according to the company. This approach makes the whole chipset smaller, more powerful and more energy-efficient.

TSMC plans to employ its new 3D stacking technology at a chip packaging plant it is building in the Taiwanese city of Miaoli, people with knowledge of the matter told Nikkei. Google and Advanced Micro Devices, Intel’s smaller rival, will be among its first customers for SoIC chips, the sources added, and are helping TSMC to test and certify them. Construction on the plant is slated for completion next year, with mass production to begin in 2022.

While TSMC manufactures chips for almost all of the world’s key chip developers, from Apple, Huawei and Google to Qualcomm, Nvidia and Broadcom, it has previously left the chip packaging services to a wide range of specialized players, including ASE Technology Holding, Amkor and Powertech, as well as rising government-backed players in China, such as Jiangsu Changjiang Electronics Technology, Tongfu Microelectronics, and Tianshui Huatian Technology Co.

With its SoIC technology, however, TSMC is set to lock its premium customers into its ecosystem for chip packaging as well, a chip packaging expert with knowledge of the developments told Nikkei Asia. This is because customers who need higher-end chips are more willing to test the latest technologies.

“TSMC is of course not trying to replace all traditional chip packaging players, but it aims to serve those premium clients at the very top of the pyramid so those deep-pocketed chip developers like Apple, Google, AMD and Nvidia won’t leave TSMC for its competitors,” the person said.

“These new chip stacking techs require advanced chip manufacturing expertise as well as a lot of computer simulations to achieve precise stacking, so it’s very difficult for traditional chip packaging providers to step in,” said another chip packaging industry expert.

TSMC is not the only chipmaker investigating the possibilities of more advanced chip packaging.

Smaller rival Semiconductor Manufacturing International Co., China’s biggest contract chipmaker, is looking at building similarly advanced chip packaging capacity and has ordered equipment from some of TSMC’s suppliers to run a small-scale advanced packaging line, multiple sources said. This is despite the fact that most industry executives do not expect SMIC to be able to take on market leaders, both because it lacks the technological prowess and because of Washington’s tightening export controls on the Chinese chipmaker.

“Still, we clearly see SMIC’s ambition to expand its footprint at the forefront of chip packaging, although it will take a lot of time,” one of the sources said.

Intel and Samsung, the world’s two biggest semiconductor manufacturers by revenue, are also betting big on next-generation chip stacking technology, and each claims to be at the forefront of the industry in this area. But unlike TSMC, which serves a wide range of chip designers, Intel and Samsung mostly build chips for their own use, and are developing advanced packaging capabilities mainly to differentiate their chips from those of its rivals.

Samsung, on the other hand, is aggressively expanding its foundry operations — the business of making chips for other companies — and counts Qualcomm and Nvidia as key customers. This puts the South Korean chip titan in more direct competition with TSMC.

“We expect revenue from our backend services, which include both advanced packaging and testing to grow at a rate slightly above the corporate average in the next few years,” TSMC CEO and Vice Chairman C.C. Wei said in an earnings briefing in mid-October.

TSMC’s revenue from chip packaging and testing services reached $2.8 billion in 2019, around 8% of its total revenue of $34.63 billion, and is expected to grow at close to the same rate as its revenue for 2020, the company said.

Google plans to use chips made with the SolC process for autonomous driving systems and other applications, a person with knowledge of the matter told Nikkei Asia. Google is a relative newcomer in designing its own chips, which it currently uses for artificial intelligence computing in its data center servers.

AMD, which develops microprocessors for computers and servers, is also eager to take advantage of the latest stacking technologies in hopes of creating chip products capable of outperforming those of its bigger rival Intel, another person said.

TSMC declined to comment on specific customers but told Nikkei Asia that because computing tasks are much more varied and demanding than they used to be, “it is necessary for semiconductor and packaging technologies to evolve together.” Customer demand for advanced chip packaging services, it added, is increasing.

TSMC’s serious entrance in the chip packaging business came in 2016 to help Apple develop more powerful chips — packaging processors together with memory chips — for its flagship iPhones. TSMC’s signature packaging service has been viewed by some market watchers as one of the reasons why Apple is sticking with TSMC as the sole supplier of iPhone processors. Up until this year, most of TSMC’s chip packing revenue has still been from Apple, according to Mark Li, an analyst with Bernstein Research.

The advanced packaging industry was $29 billion in 2019 and is expected to grow at a compound annual growth rate in between 2019-2025 of 6.6% to reach US$42 billion in 2025, according to research agency Yole Développement. Within all the segments, 3D stacking packing is set to grow the most rapidly at a rate of 25% in the same period of time, the research company said.

TSMC already has a chip packaging plant in the Taiwanese city of Taoyuan, mainly serving Apple’s needs. Besides Taoyuan and Miaoli, TSMC is also building a chip packaging plant in the southern Taiwanese city of Tainan near its most advanced 5-nanometer chip plant, dubbed Plant 18, which is still expanding to later churn out even more advanced 3-nanometer chips.

Arisa Liu, a semiconductor analyst with Taiwan Institute of Economic Research, said the demand for advanced packing is growing, as premium chip developers worldwide seek more customized chips that can generate powerful performance and help them stand out from their rivals.

“It has become a new arena for leading chip manufacturers TSMC, Samsung and Intel, as well as for global leading chip developers,” Liu said. “It’s also viewed as a means to counter the slowing of Moore’s Law.”

Google and AMD did not respond to Nikkei Asia’s request for comment on this topic.