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Taiwan's TSMC to build $16bn advanced chip facility

World's largest contract chipmaker wants more orders from Apple, Qualcomm ahead of rivals

TSMC's advanced chip facility in the southern Taiwanese city of Tainan

TAIPEI -- Contract chipmaker Taiwan Semiconductor Manufacturing Co., which controls a leading 55% share of the global market, said on Wednesday it plans to build a $500 billion New Taiwan dollar ($15.7 billion) facility in Taiwan that would churn out the world's most advanced chips.

"We're asking the government to help us find a plot that is large enough and has convenient access so we can build an advanced chip plant to manufacture 5-nanometer and 3nm chips," TSMC spokesperson Elizabeth Sun told the Nikkei Asian Review.

The smaller the nanometer size, the more advanced the chip -- but also the more challenging to develop. Apple, for example, uses TSMC's 16nm process technology for the core processor chips packed in its latest iPhone 7 handsets. The Taiwanese company is looking to produce 10nm chips beginning early 2017.

TSMC's announcement about the plant came a day after Yang Hung-duen, Taiwan's minister of science and technology, told local media on the sidelines of a government meeting on technology that the company will build the facility and launch production there as early as 2022. Yang also said the ministry may select a site in southern city of Kaohsiung for the plant.

Some 50-80 hectares of land (1 hectare being roughly the equivalent of a soccer field) would be needed for the factory, said Sun, who declined to provide details about the timing of the construction and production.

TSMC is looking to get an edge on major rivals Samsung Electronics of South Korea and Intel of the U.S., as well as to tap opportunities in the fast-growing areas of artificial intelligence, machine learning and self-driving autonomous cars, which require powerful chips, said Jerry Peng, an analyst at IEK, Industrial Technology Research Institute.

"However," Peng said, "only those premium tech players with deep pockets such as Apple, Qualcomm, Nvidia of the U.S., Huawei of China and MediaTek of Taiwan can afford such advanced chip technology -- and there are fewer and fewer of them."

TSMC has some 470 customers worldwide. Its biggest clients are Apple and Qualcomm, with each accounting for 16% of the company's revenue of NT$843.5 billion for 2015. TSMC also makes chips for Nvidia, Huawei's semiconductor arm Hisilicon Technology, and MediaTek.

"As long as we have those benefits in power consumption, performance, size and cost, we will continue to push the [chip] process technology," Raj Talluri, senior vice president of Qualcomm, said in a press conference in Taipei on Wednesday when asked whether his company sees a need for 5- and 3nm process technology.

"We are now on 10nm node, but we can't comment what we are going to do in the future ... . We will continue to evaluate, and when there is an advantage, we will do it," added Talluri.

While Qualcomm turned to Samsung for both 14- and 10nm process technology, an industry source said the world's largest mobile chip provider has decided to return to TSMC for 7nm chips, which are scheduled to go into mass production in the first quarter of 2018. Qualcomm declined to comment on the matter.

In late September, TSMC co-CEO Mark Liu broke the news that the company was working on 5nm chips and had assigned 300-400 engineers the task of developing 3nm technology and conducting research on 2nm technology.

While TSMC will begin mass-producing 7nm chips in the first quarter of 2018, its main competitor, Intel, said it will begin making 10nm chips in the second half of 2017. Samsung Electronics, meanwhile, said it will introduce 7nm chips by the end of 2018. Neither Intel nor Samsung has said whether they plan to develop 5- and 3nm chips.

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