Taiwan Semiconductor (NYSE:TSM) is the world's leading independent semiconductor foundry. The company builds chips for just about every chip design house today, including the likes of Qualcomm (NASDAQ:QCOM) and Broadcom (NASDAQ: BRCM). The company has seen a boom in demand, driven primarily by explosive growth in demand and the performance needs of mobile processors. However, despite being a solid company, management made some very unusual statements on its recent call vis-à-vis its 16-nanometer FinFET technology.
20-nanometer is in "volume production," but when will it reach market?
On the call, TSMC's management noted that it was in high-volume production of its 20-nanometer manufacturing process today. However, it's important to note that there is a big difference between being in "volume production" and actually shipping product in mass quantities to customers.
Indeed, there has not yet been a single application processor announced for the 20-nanometer node. Further, the one mobile product that has been announced -- Qualcomm's 20-nanometer MDM9x35 modem -- is sampling in the first half of 2014 for launch in the second half. This tends to suggest that mobile applications processors built on the 20-nanometer node won't show up until 2015.
TSMC calls Intel out on FinFETs
One of the most surprising things on the call was that TSMC actively called Intel (NASDAQ:INTC) out on the claims that it made at its recent investor meeting. In particular, TSMC -- with no knowledge of the characteristics of Intel's 14-nanometer manufacturing process -- said that Intel's comparison was "highly misleading." In particular, TSMC stated that Intel's claims of a 35% density advantage over products built on TSMC's 16-nanometer process are wrong -- the difference is much smaller.
TSMC claims that customers will be taping out (i.e., completing initial designs) of products on its 16FF process during 2014. Since TSMC claimed multiple tape-outs on 20-nanometer throughout 2013, and since those 20-nanometer products still haven't hit the shelves in early 2014, it would stand to reason that products based on TSMC's 16FF process won't actually be available to consumers until the second half of 2015.
Intel has already "taped out" 14-nanometer products
While TSMC claims that the first customer tape-outs on 16FF are coming throughout the year, and that it will be on time/target with Intel's 14-nanometer products, it's difficult to ignore that Intel has actually been taping out extremely sophisticated 14-nanometer designs for quite some time. In particular, the company demonstrated its next-generation, low-power, PC-oriented Broadwell processor running in a laptop at September's Intel Developer Forum.
This implies that Intel taped out its first 14-nanometer products in late 2012/early 2013. Consider, then, that these products won't show up in systems until the second half of 2014. This would imply a gap of at least a year and a half from "initial tape out" to "showing up in commercial systems." Given that this is the case, investors should not expect to see TSMC generate material revenue from 16FF, particularly in high-volume mobile devices, until the second half of 2015.
Foolish bottom line
TSMC is a great semiconductor manufacturer and has been one of the key driving forces in the fabless semiconductor industry. However, it's tough to ignore that, while TSMC proclaims it will "out-compete" both Intel and Samsung on its earnings calls, the facts paint a grimmer picture. Intel really does have a lead in manufacturing technology, both from a node-for-node perspective as well as on timing. Intel will be in the market with 14-nanometer parts in 2014. TSMC's customers, on the other hand, may not be until the second half of 2015.