TSMC’s overwhelming market share is hard to shake. Japan’s 2nm technology is 30% cheaper but has not yet been produced. The truth about the technology is exposed.

Japan's national chip team, Rapidus, has promised to produce cheaper 2nm chips, but it still needs to prove it can make them. Foreign media The Motley Fool reported that for customers designing complex chips, having a proven and trustworthy manufacturer is more important than obtaining the lowest manufacturing price, and TSMC has an excellent track record in this regard.

Rapidus offers 2nm wafers for about $21,000, while TSMC's wafers are reportedly priced at $30,000, but according to reports, this may be a sizable discount as Rapidus struggles to achieve important technology milestones. But can Rapidus really fulfill its promise and shake TSMC’s overwhelming market share?

Rapidus has started trial production at its factory in Hokkaido, Japan, and has reportedly held discussions with more than 60 potential customers. Japan has also invested billions of dollars in the project, hoping to revive its domestic semiconductor manufacturing industry. However, making advanced chips is extremely difficult, and Rapidus has already encountered some problems.

Bloomberg reported that Rapidus has not yet successfully produced a fully functional static random access memory unit, an important milestone that must be achieved in its journey to achieve full maturity of its 2nm process. Japan's Jiji News Agency also reported that discussions are currently underway to delay the production cycle by about one year. Rapidus said its timetable remains unchanged.

But even if the company can meet its deadlines, it will need to prove it can reliably deliver wafers at suitable profit margins. If a large number of wafers are defective, or the company simply can't make a profit, lowering prices won't help.

At the same time, TSMC has begun producing 2-nanometer chips and currently accounts for about 73% of the global third-party chip foundry market. The company's third-quarter revenue reached US$46.7 billion, an annual increase of 41.2%, and its gross profit margin reached 66.4%.

TSMC said 8% of its wafer revenue came from the 2-nanometer process, up from 3% in the second quarter. This is significant because it shows that TSMC is starting to generate revenue from manufacturing processes that Rapidus has yet to commercialize. TSMC will continue to solidify this lead, while Rapidus will have to work hard to catch up.

TSMC currently derives 8% of its wafer revenue from its 2nm process, up from 3% in the previous quarter, while Rapidus has not yet begun commercial production of 2nm wafers.

TSMC's partnerships with major technology companies give it another advantage. Customers designing expensive, precision wafers want a reliable manufacturing partner, not just the lowest price. TSMC predicts that by 2025, it will produce more than 12,600 different products using 305 different processes.

The report pointed out that Rapidus will not pose a threat to TSMC’s leadership in cutting-edge chip manufacturing in the short term. Given the huge margins of the mature foundry business, it's not surprising that other companies would want to challenge TSMC and seize its massive market share. But as Intel is also experiencing, starting a foundry is difficult and expensive. TSMC will continue to maintain strong development momentum.