The Great 28nm Debacle!

40nm was a big node while I was Director of Foundries at the IP company Virage Logic which was later acquired by Synopsys. 40nm was big because the top fabless companies multi-sourced designs from one foundry to another with relative ease to get the best wafer prices. It was also the node where some of the big IDMs went fab-lite moving their leading edge IP and designs to the pure-play foundries.

I totally get the need for multi-sourcing. In my personal life I multisource my technology needs so I’m not beholden to any one company. I use FireFox for browsing, Yahoo for news, Google for search and maps, iPhones and iPads, Microsoft based laptops, it seems like human nature 2.0. In business however it’s a double edged sword, absolutely.

Since TSMC was first to 40nm, they did most of the heavy lifting only to see mass production moved to UMC, Chartered, and SMIC. I remember feeling bad for the TSMC wafer sales team doing all the work and not getting the appropriate rewards. I also remember wondering about the TSMC IP embedded in the GDS II design data (design rules etc…) moving about the world. Some fabless companies did their own design rules as a superset of the foundries to make sure designs were portable. Others just handed over TSMC GDS II and said, “Make this please.”

28nm changed things of course when TSMC was the only foundry to yield so it was the first and last full node for single source manufacturing we will ever see, my opinion. The TSMC 28nm fabs have been pretty much full since the first wafers shipped in Q4 2011. 28nm wafers were even on allocation at times which made the entire fabless semiconductor ecosystem uneasy. It also hit the fabless margins hard since TSMC did not have any pricing pressure. Considering what happened at 40nm the record high 28nm margins TSMC realized were well earned.

I remember the fabless quarterly conference calls in 2012 where the CEOs blamed 28nm wafer shortages for earnings misses which implied TSMC was not doing their job. It would have been nice if the CEOs were a bit more humble and admitted that TSMC did in fact ship the wafers under contract and it was their reliance on multi-sourcing that did them in this time. TSMC could have certainly built out enough 28nm capacity to prevent shortages had they been asked, right?

The 28nm landscape is changing again now that UMC, SMIC, GF, and Samsung are yielding enough to make a profit. Not the same profit as TSMC of course since they have the best yield and the fabs have been paid for many times over the last 2.5 years. At the same time TSMC is the only fab to ramp 20nm with production parts from Xilinx (FPGA), QCOM (modem), and Apple (SoC) hitting the market this year so the margins will keep pouring in.

“Handel Jones is WRONG about 20nm by one year. According to JK Wang, Vice President of Operations for 300mm fabs, TSMC will ship 300,000 20nm wafers in 2014 and 1,000,000 20nm wafers in 2015.“

The TSMC Q2 2014 conference call on July 17[SUP]th[/SUP] will reveal just how much 20nm revenue will be recognized so let’s talk after that.