TSMC rejigs chip production to reduce costs

Taiwan Semiconductor Manufacturing, the world’s largest contract chipmaker, is to offer its customers a standardised semiconductor service, called “design for manufacturing” (DFM), to cut costs and increase throughput.

The company, the world’s first silicon foundry, will continue its traditional business of manufacturing made-to-order chips.

The development, which will move TSMC closer to a conventional semiconductor manufacturer, with design and fabrication under one roof, represents the company’s most aggressive move so far to make the foundry model sustainable as the semiconductor industry becomes more technologically complex and capital-intensive.

The move comes about a year after Morris Chang, TSMC founder and chairman, first announced that it would add back-end and design services to its core manufacturing business.

Rick Tsai, who became chief six months ago, told the Financial Times he would offer his customers standard chip designs, or “cores”, using advanced technology in which the circuits on a chip are only 65 thousand millionths of a metre (“65 nanometre technology”) apart.

Since its establishment in 1987 as the world’s first foundry, TSMC has concentrated on producing chips to other companies’ designs. But chips today can have many millions of components and it has become harder to realise these increasingly complex designs in production.

As a result, chip design houses, the foundries’ customers, have been reluctant to move to the more advanced technologies in which TSMC and other foundries have invested.

Mr Tsai said that, to make its large investments in cutting-edge technology pay off, the company needed to get more customers to migrate to the newer technologies faster.

So TSMC has started to help customers redesign their chips so they can be more simply manufactured. Other global semiconductor industry leaders such as Intel, the world’s largest chip manufacturer, have also started investing in DFM.

“Up to now, we have been working with a few companies in a prototype manner, and we provide these DFM solutions to them individually,” Mr Tsai said. “But that is not very user-friendly. We need to put them into a package, so a lot more customers can get access and be able to use it.”