TSMC breaks ground on $9.3bn 'Gigafab'

The Taiwanese chip foundry has begun building a massive semiconductor-making plant, saying its needs 28nm capacity due to a growing market for its goods

TSMC has begun construction on a 'Gigafab' facility capable of producing chips at the 28-nanometre scale. TSMC is the world's largest dedicated semiconductor maker with 2009 sales around three times its nearest rival, fellow Taiwanese company UMC, according to chip research company IC Insights.

The fab will be the chip foundry's third Gigafab in Taiwan and its second with 28nm capacity, TSMC (Taiwan Semiconductor Manufacturing Company) said in an announcement on Friday. The massively large facility, which will cost $9.3bn (£6.1bn) to complete, is on a 18.4-hectare site with a projected clean room area of 104,000 m2 (around 14 football fields), it added.

"The overall market for foundry goods is growing, and we need a third Gigafab and a second with 28nm," said Gareth Jones, European director of business development for TSMC, who noted that the company's policy is to always have a second fab for any technology.

Sales of semiconductors have continued to bounce back after the recession-led lows of 2009, powered by healthy sales of PCs, mobile phones and corporate IT gear, the Semiconductor Industry Association said in early July. TSMC counts networking specialist Broadcom, graphics card provider Nvidia and Intel among its clients.

The Gigafab, which will begin by manufacturing on the 40nm scale, is expected to increase TSMC's fabrication capacity by over 100,000 12-inch wafers per month, the company said. That makes it significant to the supply side of the semiconductor sector, according to Michael Penn, chief executive officer of semiconductor industry analysts Future Horizons. However, he cautioned that it would take time to see the effects.

"What you have to read between the lines is that an announcement to build doesn't instantly give you a Gigafab, because these things take five or six years to build, and you don't build them straight off, you build them in increments," he said on Monday.

TSMC has over fifty percent of the semiconductor foundry market, according to Penn. "If no one else builds a similar kind of fab, they'll take up more than half. This is why they're doing it — to stay a dominating supplier."

Penn estimates that the shell of the facility will account for about 15 percent of its $9.3bn cost, with the other 85 percent going on equipment. He expects this to allow TSMC to scale up production as needed, and he called it an "easy investment" for TSMC as the "shell lasts forever but equipment lasts for only a few years".