During its earnings call, TSMC proclaimed itself a 'Foundry 2.0' company to better reflect what it can offer to its customers and perhaps to defray anti-trust concerns from regulators. When it comes to self-branding, the company is also perhaps taking a page from Intel, which calls itself an integrated device manufacturer 2.0 (IDM 2.0). However, TSMC is much more than a contract chipmaker today.
"At this time, we would like to expand our original definition of foundry industry to Foundry 2.0, which also includes packaging, testing, mask making, and others and all IDM, excluding memory manufacturing," said C.C. Wei, chief executive and chairman of TSMC at the company's earnings call with analysts and investors. "We believe this new definition better reflects TSMC's expanding addressable market opportunities in the future."
Other concerns might be top of mind, too. Perhaps TSMC has rebranded itself as a 'Foundry 2.0' to avoid antitrust concerns. The foundry market is big, and TSMC owns around 61.2% of it, according to TrendForce. However, the mask-making and packaging markets are also huge, and TSMC's presence in that market is relatively insignificant. As a result, under the Foundry 2.0 definition, TSMC's market share drops to around 28%, which should please regulators. However, as was the case with Microsoft and browsers a couple of decades ago, regulators might not accept TSMC's own definition of its addressable markets, which now includes everything from mask-making to packaging.
Of course, there are plenty of other reasons for TSMC to justify the 'Foundry 2.0' positioning. When Morris Chang launched TSMC in 1987 (and essentially established the whole foundry industry), the company used equipment from the Industrial Technology Research Institute (ITRI) and a fabrication technology from Philips to process wafers for its very first customers, large companies like Intel, Motorola, Philips, or Texas Instruments. These companies could not only develop their own designs but also make their own photomasks and do assembly, testing, and packaging for their own products. All they needed from TSMC was its production capacity (which was several generations behind), as they did not want to use their own to build outdated products.
Fast forward to today, TSMC can handle all aspects of chip production, print industry-leading photomasks, process wafers using nodes that are ahead of those available at IDMs like Intel, dice wafers, test individual dies, then package them using some of the most advanced packaging technologies available.
While large clients like AMD, Intel, and Nvidia have silicon specialists who can even optimize TSMC's production nodes for particular products, many emerging companies do not have the engineering talent on their staff. Such companies would rather bring TSMC a .GDS file and expect their chip several months later, paying TSMC hefty sums for its services. Of course, TSMC would only handle advanced chip packaging, but it can also help find the right OSAT shop for its clients.
Of course, TSMC is not the only Foundry 2.0 company in the industry, as Intel Foundry can also offer vertically integrated services to its clients. However, companies like GlobalFoundries preferred to sell off their mask shops to third parties, focusing on the most lucrative side of the foundry business, but now missing a crucial part of the whole chip manufacturing flow.
For TSMC, its Foundry 2.0-badged vertical integration of services means higher revenue in the coming years. For example, the company expects its 2024 revenue to be mid-20% higher than in 2023. It also expects growth to continue in the future.
