Why a Rising TSMC Challenger Could Reshape the Chip Foundry Landscape
Japan's state-backed Rapidus is promising cheaper 2-nanometer chips, but it still has to prove that it can manufacture them.
The advanced chipmaking sector has long been controlled by Taiwan Semiconductor Manufacturing (TSMC). However, a Japanese startup called Rapidus, backed by the Japanese government and in collaboration with IBM, is determined to challenge TSMC's dominance. Rapidus aims to commence mass-producing 2-nanometer chips by late 2027 or early 2028.
CEO Atsuyoshi Koike recently confirmed this timeline, despite acknowledging challenges in achieving key technical milestones. Rapidus also intends to compete on price, claiming it could charge approximately $21,000 per wafer for its 2-nanometer process, compared to TSMC's reported $30,000. This potential price difference could be significant.
Rapidus has started trial production at its facility in Hokkaido, Japan, and has reportedly engaged with over 60 potential customers. The Japanese government has pledged substantial funds to bolster this project, aiming to revive Japan's semiconductor manufacturing industry. However, the path to advanced chip manufacturing is fraught with difficulties, and Rapidus has already faced setbacks.
Bloomberg recently reported that the company has yet to successfully produce operational static random access memory cells, which is a crucial milestone before achieving a fully operational 2-nanometer process. Japan's Jiji Press has also hinted at a possible one-year delay. Rapidus maintains that its schedule remains unchanged, but meeting this deadline will require the company to reliably deliver chips at a reasonable profit margin.
Lower prices won't suffice if a large number of chips are defective or if the business cannot make a profit.
Currently, TSMC is the market leader, controlling approximately 73% of the global third-party chip foundry business. The company's revenue in Q3 was $46.7 billion, marking a 41.2% increase year-over-year, with gross margins at 66.4%. A substantial portion of TSMC's wafer revenue, 8%, came from 2-nanometer technology, highlighting its growing revenue from this manufacturing process.
This progress underscores TSMC's potential to further solidify its lead, while Rapidus strives to catch up. TSMC's established relationships with major technology companies also provide an edge, as these companies prefer dependable manufacturing partners over the lowest prices. TSMC's extensive product portfolio, with over 12,600 products across 305 processes in 2025, further underscores its industry dominance.
While Rapidus poses a potential threat, it is unlikely to challenge TSMC's leadership in cutting-edge chip manufacturing in the near future. The challenge of establishing a foundry business is immense and costly, as Intel's experience demonstrates. TSMC's position is expected to remain strong in the foreseeable future.
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