Taiwan Semiconductor Manufacturing Co. aims to secure the supply chain and build the capacity to produce high-purity neon gas locally. The company faced havoc in the rare gas market after Ukrainian companies stopped supplying it after Russia’s war in Ukraine destroyed its production capacity.
TSMC is in talks with a number of gas suppliers to explore the possibility of producing high-purity neon gas in Taiwan within three to five years, said a senior information technology, materials management and risk management officer. Vice President JK Lin said in an interview with Nikkei.
As the world’s largest contract chip manufacturer, TSMC needs a steady and large supply of materials (chemicals, wafer substrates, etc.) to satisfy its customers. The company faced a major challenge of dealing with the global chip shortage from 2020 to 2022. This increased costs and required higher prices for customers.
But to make its supply chain more resilient, TSMC is now looking forward to localizing parts of its supply chain, especially the production of high-purity gases like Neon. This is not particularly easy as neon is a by-product of steel manufacturing.
“We have concrete plans to work with suppliers to localize some of our neon gas supply, and we are currently purchasing equipment,” Lin told Nikkei. “The idea is to have more sources of supply to make the supply chain more secure. But our plan is not to manufacture all our supplies locally. It’s very expensive.”
Earlier this year, TSMC faced major turmoil after Russia destroyed two major producers of high-purity neon, Cryoin and Ingas, in Odessa and Mariupol in the first days of the war. These two companies shipped 360,000 m^3 of high-purity grade 5.0 neon last year, with 75% of their production going to chip makers. They have controlled about 50% of semiconductor-grade neon by 2021, it was revealed earlier this year.
The semiconductor business is a major industry in the world, and it is impossible to localize the entire supply chain in one country. The company sources production equipment from the Netherlands and the United States. We buy raw materials from Europe and Japan and build factories using local companies.
ArF immersion lasers used to manufacture advanced chips requiring deep ultraviolet (DUV) lithography use a mixture of neon, fluorine, and argon gases. Neon makes up over 95% of the blend. Meanwhile, modern production tools are equipped with neon recycling systems that reduce actual consumption by over 90%. However, while each ArF/DUV scanner does not consume much gas, there are tens of thousands of such scanners in use worldwide, all of which require neon, fluorine, and argon gases. The demand for these noble gases is strong.
Demand for chips is currently slowing, but TSMC’s revenue continues to grow.Company Earnings for October posted TWD 210.3 billion ($6.673 billion) represents a significant increase of 56.3% from TWD 134.5 billion ($4.267 billion) in October 2021. bloombergTSMC may be one of the last chip companies to report revenue declines due to weak demand, but it will be the first chip maker to benefit from a recovery in demand in 2023-2024. So it makes a lot of sense for foundries to invest in their supply chains now.