Why TSMC’s Japan experience is good for its German fab: Q&A with DIGITIMES advisor Albert Lin

TAIPEI, Feb. 22, 2024 /PRNewswire/ — Having to overcome ramps and bumps on its internationalization journey, Taiwan Semiconductor Manufacturing Company (TSMC), the world’s leading pure-play foundry, is learning to act globally and think locally while expanding overseas. Owing to the assistance and support of the Japanese government, the construction of TSMC’s first fab of its joint venture in Kumamoto, Japan, has been progressing smoothly and on schedule for mass production in the fourth quarter of 2024.

DIGITIMES Asia talked to Albert Lin, an advisor to DIGITIMES Inc., on how TSMC can leverage its experiences in Japan to its other overseas ventures, including the Dresden fab that will start construction in the fourth quarter this year.

Along with former TSMC General Counsel Richard L. Thurston, Albert Lin will also share his experience and knowledge about how TSMC can leverage Japan’s strength in semiconductor materials in the Angstrom era on the first DIGITIMES Asia GeoWatch forum, scheduled on March 27 Taipei time.

Q: TSMC’s expansion in Japan has been a win-win for Japan and TSMC. But for audiences unfamiliar with the semiconductor industry, could you explain why TSMC’s investment in Japan is important to the country? And why is it important for TSMC to leverage Japan to secure its leadership?

Japan has a glorious history in the semiconductor industry and remains leading or competitive in various industry sectors, such as materials and equipment. The main weak spots, if any, are in advanced-process manufacturing and IC design. TSMC’s investment will fill the gap in advanced-process manufacturing and facilitate the change of ecology of the whole Japan semiconductor industry, including IC design.

TSMC will benefit from in-depth engagement with Japan’s materials, equipment, and advanced packaging sectors. In particular, Japan’s materials suppliers have a tradition of conducting long-range research, which will illuminate and expedite TSMC’s process development. In return, TSMC can give feedback to the materials suppliers on the direction to head on. Collaborations of this sort will create synergy for both sides.

Q2: Some argued that the Japanese government should not subsidize TSMC‘s second fab in Japan, which may produce advanced chips below 7nm. Takashi Yunogami, who worked for Elpida and Hitachi’s semiconductor division, predicted that TSMC’s Kumamoto fabs would face weak demand in the future. Does that make sense? Should TSMC make advanced chips in Japan?

I consider this issue a twofold question: Why is Japan’s domestic demand weak, and will the weak demand impact TSMC’s operation in Japan?

Japan’s IC design sector is relatively weak compared to other sectors in Japan’s semiconductor industry. This problem was inherited from Japan’s DRAM era. A DRAM fab, which has a large capacity, only needs a few design teams to design its products. This is because DRAM is a commodity product with a standard interface. In contrast, system IC products are more diversified; the quantity of each product is relatively much smaller than that of DRAM; hence, the system IC products need more IC design teams to work on.

This has been a longstanding issue for Japan. Expanding its fabless companies is necessary if Japan wants to recover its semiconductor industry fully.

As for TSMC, the lack of Japanese domestic customers is not a problem. Remember that the chips are shipped by air flight. Chips have high mobility. As long as the market sentiment of the global semiconductor industry is not too bad, the allocation of production of its customers’ products among different sites of TSMC fabs should be easily manageable.

The assistance rendered by building an advanced-process fab to facilitate the recovery of a full-blown Japanese semiconductor ecology alone will pay off the Japanese government’s subsidy.

Q3: Customers have requested that TSMC venture abroad to reduce risks arising from the international situation, so that TSMC will start mass production in Kumamoto Fab 1 in Q4 2024. Besides collaboration with Sony, some people also point to Japan’s strength in fundamental science research. How can TSMC leverage Japan’s strength and create synergy?

Taking advantage of the strength of fundamental research in Japan is an excellent subject to work on; this is a common practice for most high-tech conglomerates. However, Taiwanese companies have a different strategy for exploring future technologies. Their “path-finders, ” R&D personnel, closely survey and monitor the development of potential technologies or materials candidates. Once the likelihood of the candidate technologies or materials increases, they will use their strength of TD (Technology Development) to catch up and prevail.

Bearing this strategy in mind, they will direct their collaborations with Japanese partners to technologies or materials already in a closer range of future applications, such as advanced packaging and new materials development.

From my perspective, Sony’s pioneering position in advanced packaging implementation motivates TSMC’s collaboration with Sony. Sony’s CMOS sensor product is a classic case of heterogeneous integration. The use of TSV (Through Silicon Via), the integration of CMOS sensors, logic circuits, and DRAM chips, and the copper hybrid bonding technology are all leading in the industry.

TSMC and Samsung have already set up material research laboratories in Japan. This illustrates their awareness of how to best utilize their partnership with Japan.

The collaborations with advanced manufacturing fabs also benefit Japan’s materials suppliers. New semiconductor materials development requires advanced manufacturing technology and equipment to work with. Japan’s partnership with these leading-edge manufacturing forces will help them to strengthen their leading position in the material market.

Q4: Since you have worked in a German-Taiwan semiconductor joint venture, could you share from your experience what would be a more likely scenario for TSMC’s European fab (ESMC), which will start construction in Q4 2024? Is working with Germans more similar to Japan or Americans? What advice would you give to TSMC so that they can have a smoother experience and build a sound international management system?

It isn’t easy to use one country to characterize another. However, if I am forced to choose, I will say that the German working style is more similar to that of Japan. These two countries are both vital in the arena of power devices; this is by no means a coincidence. Power devices used in high-end applications require high reliability. To achieve high reliability, strict working discipline is needed. The work discipline required for power device manufacturing is common in Germany and Japan.

It appears to me that Germans always make plans in advance and work in a well-organized fashion. Once the program is started, that working habit means persistence and perseverance. But that might also mean a lack of flexibility. I hope that this is not my stereotypical prejudice.

My former German colleague admits that negotiation is not a skill that Germans are particularly good at. Therefore, their strategic negotiation team comprises an American, a European, and an Asian, who oversee the negotiations with their corresponding territories.

Labor unions are an integral part of German society and play an essential role in company operations. They have strong influences even at the board meeting level. Learning and respecting the culture is pivotal to the success of business operations there.

Editor’s note: Albert Lin received his Ph.D. in Physics in 1988, taught at National Central University, and then moved to the technology industry. Lin served as director and vice president of ProMOS Technologies, and president of ConDel International Technologies. He chaired the Lithography Forum and served as the chairman of the Supervisory Board of the Taiwan Semiconductor Industry Association. Lin is now a visiting research fellow in the Department of Physics at National Taiwan University. His main research fields are new materials, new mechanisms, and basic research on quantum information. He is the standing supervisor of the Taiwan Association of Quantum Computing and Information Technology.

Online Forum – TSMC Sparks Semiconductor Renaissance in Japan:

Delve into “TSMC Sparks Semiconductor Renaissance in Japan” at our GeoWatch Webinar. We’ll examine TSMC’s strategic success with its new Kumamoto plant and its implications for global semiconductor leadership amidst the intense chip rivalry. Discover how Japan’s unique advantages are aligning with TSMC’s expansion strategies.

If you wish to join this online forum, register at: https://www.digitimes.com.tw/seminar/DIGITIMESAsia_20240327/