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TSMC says it will be first to make 5-nano chips in 1H 2019

Chip race heats up as Apple supplier aims to maintain edge

TSMC's Co-Chief Executive Mark Liu, right, presents an award to Chief Executive Gary Dickerson of Applied Materials, a key supplier. (Photo by Cheng Ting-Fang)

HSINCHU, Taiwan -- Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker and a key Apple supplier, will begin to make cutting-edge 5-nanometer chips in small quantities in the first half of 2019, said Co-Chief Executive Mark Liu on Thursday.

Liu told attendants at a TSMC supplier meeting that the Taiwanese semiconductor company is progressing well on advanced technologies, disclosing details for 3nm chip technology development.

"We have dedicated around 6,000 [research and development] staff on the 5-nanometer process technology, and we are very optimistic about 3-nanometer chip development though it still takes time," said Liu, "For 3-nanometer, we have already deployed several hundred [research and development] engineers in research programs."

If all goes according to plan, TSMC will be the first chipmaker to possess advanced 5nm chip technology. This will help TSMC to maintain its technological edge over its two major rivals, Intel and Samsung Electronics, in the global contract chipmaking market.

The Taiwanese chipmaker now boasts of a 55% market share and dominates orders for iPhone 7 range core processors, which uses TSMC's 16nm chips.

TSMC is also expected to monopolize the production of iPhone's 10th anniversary range this year. Apple will adopt its 10nm technology for core processors used in the upcoming handsets.

The smaller the nanometer size, the more advanced the chip, but also the more challenging to develop.

The big three

Only Intel, TSMC, and Samsung are capable of investing heavily in nanotechnology.

TSMC's Liu says his company expects capital expenditure of $10 billion this year and its research and development spend will increase more than 15% in 2017 from a year ago.

In 2016, TSMC injected more than $2.2 billion into research and development, while Intel and Samsung spent more than $12.7 billion and $2.8 billion, according to IC Insights.

Samsung has said it would introduce 7nm chips around the same time as TSMC next year.

Intel CEO Brian Krzanich recently said the company would invest $7 billion to complete the construction of an advanced chip facility in Arizona and begin testing and researching its 7nm technology but did not reveal a production schedule.

But neither Intel nor Samsung has said whether they plan to develop 5- and 3nm chips.

Samsung and TSMC are wrestling for market share in 10nm production. TSMC began producing 10nm chips in mass quantities in the third quarter in 2016 and will begin shipping the new product this quarter.

The Taiwanese chipmaker is counting on Apple, Huawei Technologies' chip arm Hisilicon Technology, and MediaTek, the largest mobile chip provider to China, to buy its 10nm chips.

Samsung, on the other hand, said it started churning out 10nm chips last year, and it will use the new component for its own smartphones. In addition, U.S. mobile chip king Qualcomm is also a main patron for Samsung's new chip.

Meanwhile, Intel said it will start shipping 10nm chips for personal computers this year.

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