3nm, One Dominant

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The race for mobile application processors (APs) using 3-nanometer (nm) processes will begin in earnest in the second half of this year.

Following Apple last year, MediaTek and Qualcomm plan to debut APs with a 3nm process in October next month. Samsung Electronics and Google are also preparing to launch new APs with 3nm process. Among them, Taiwan foundry company TSMC won 3nm AP orders from Apple, Qualcomm, MediaTek and Google, successfully occupying the market.

Mobile APs are the core semiconductors that act as the brains of smartphones. Mobile APs are an expensive semiconductor, as they account for the highest percentage of the total cost of a smartphone's components (BoM), at around 20%. The 3nm process is the most advanced process, and the higher cost of chip manufacturing has been pointed out as the main reason for the recent increase in the price of smartphones on the market.

In addition, smartphone shipments are higher than in other markets such as AI semiconductors, so foundries are focusing on receiving AP orders. At present, the only foundries that can produce chips using the 3nm process are TSMC and Samsung Electronics in Taiwan, but TSMC has won all customers except Samsung.

Apple opened the door to the 3nm AP market by installing the 3nm process mobile AP "A15 Pro" on the iPhone 17 Pro and Pro Max last September. The "A17 Pro" is also TSMC's first 3nm process customer. Subsequently, the iPhone 16 series released this month is equipped with the "A18" and "A18 Pro" APs produced by TSMC's 3nm second-generation process. In particular, the "A18 Pro" is evaluated as having significantly improved performance compared to the previous one, and it can run the AI function "Apple Intelligence" smoothly.

Taiwan MediaTek will also launch chipsets produced using TSMC's 3nm second-generation process. MediaTek announced on Weibo on the 24th that it will launch the next-generation AP "Dimensity 9400" for flagship smartphones on the 9th of next month. The Dimensity 9400 is expected to deliver a 30% increase in performance over its predecessor.

MediaTek has also locked in a number of customers to supply the Dimensity 9400. The Dimensity 9400 is expected to be equipped with Oneplus 13, Vivo X200 and Oppo Fine

Qualcomm will also host the "Snapdragon Summit" event in Hawaii from October 21 to 23 and unveil the next-generation AP "Snapdragon 8 Gen 4". The Snapdragon 8 Gen 4 is also produced using TSMC's 3nm Gen 2 process. Previously, the first generation of Qualcomm Snapdragon 8 was entirely produced by Samsung Electronics, but in the future, the second generation will be produced at TSMC factories. The Snapdragon 8 fourth-generation is expected to be featured in the Galaxy S25 series that Samsung Electronics will release in the first quarter of next year.

Samsung Electronics Systems LSI is also preparing to launch the Exynos 2500 with a 3nm process. The chipset is produced using Samsung Electronics' second-generation 3nm process.

It is very likely that the Exynos 2500 will be in the Galaxy S25 series, but its adoption has become uncertain due to recent declines in yield and power ratio (performance comparison), which have led to the evaluation of its performance not being as good as the competition. power efficiency).

Taiwan media such as Trend Force have even reported that Samsung Electronics is considering replacing MediaTek's Dimension City 9400, as the cost burden may increase if the Galaxy S25 series is fully equipped with Qualcomm Snapdragon chipsets.

3nm, Far Ahead

TSMC's 3nm capacity utilization rate has remained at 100% as major IC design companies such as Intel, Apple, and Qualcomm launch new products amid rising demand for electronic products, which is expected to have a positive impact on the company's third-quarter results.

As the PC and smartphone inventory adjustments gradually end and demand gradually recovers, TSMC's 3nm capacity utilization remains at full capacity. This high capacity utilization is driven by strong demand from key customers such as Intel, Apple, Qualcomm and MediaTek, who have been launching new products on the 3nm process since September.

According to market estimates, the 3nm process, which costs nearly US$20,000 per chip, contributed about 15% of TSMC's total revenue in the second quarter, reaching NT$101 billion (about US$3.14 billion). In the second half of the year, as major customers launch new products one after another, the proportion of 3nm process revenue will increase significantly, and it is estimated that the revenue and gross profit margin in the third quarter and the full year will exceed expectations, and will continue to maintain high growth in 2025.

In addition to the strong demand for HPC, TSMC's consumer electronics business has also shown a blowout trend, with its 5nm and 4nm process utilization rates maintained at 100% since the beginning of the year, and the high-margin 3nm process is also running at full capacity.

Intel marks a significant milestone with the launch of the Core Ultra 3V series, which is manufactured on TSMC's 200nm process. True to its codename, the Lunar Lake chip, it consists of a compute module and a platform control module that are interconnected through Intel's Foveros advanced packaging technology and have integrated memory.

The compute module, fabricated on TSMC's 3nm process, integrates new E- and P-cores as well as a redesigned microarchitecture for high performance and efficiency. It also features the new Xe2 GPU architecture, NPU 4, and image processing unit (IPU) for enhanced graphics, AI computing, and multimedia processing. The platform control module, manufactured on TSMC's 6nm process, integrates the latest communication standards such as Wi-Fi 7, Bluetooth 5.4, PCIe Gen5, PCIe Gen4, and Thunderbolt 4.

TSMC's long-time largest customer, Apple, continues to be its main source of revenue. Following the launch of MacBook, iPhone 15 Pro, and iPad Pro models with 3nm process, Apple is ready to release the new iPhone 16 series on September 10 that will be fully powered by 3nm.

In October, MediaTek and Qualcomm are expected to launch their respective 3nm chips. Qualcomm will host its annual Snapdragon Summit on October 21-23, where the new Snapdragon 8 Gen 4 chip will be announced. MediaTek is expected to launch the Dimensity 9400 in mid-October.

In addition to Apple, Intel, MediaTek, Qualcomm and other major customers, NVIDIA's H100 and H200 chips, as well as the upcoming Blackwell GPU, are also expected to contribute well to TSMC's revenue.

In addition, TSMC is expected to easily beat its third-quarter expectations of more than 11% sequential growth in US dollar revenue and gross margin of 55.5% as wafer production ramps up for other major customers such as AMD, Broadcom, Google, Microsoft, Meta and other major Chinese chip companies.

With TSMC's 3nm process running at full capacity and the 2nm process expected to enter mass production in Q4 2025, prices are expected to rise, and the supply chain for advanced processes and CoWoS advanced packaging is expected to remain strong. Companies such as Chuxing, ASML and Hongkang are expected to maintain strong business performance. TSMC's monthly production capacity for the 3nm process is gradually increasing from 100,000 wafers to about 125,000 wafers. In addition, the 2nm wafer fabs in Tainan Science Park and Kaohsiung are expected to achieve a production capacity of 120,000 to 130,000 wafers per month.

*Disclaimer: The content of the article is the author's personal point of view, and it is reprinted only to convey a different point of view, which does not mean that Wuxi Chinsor agrees with or supports the view