TCM

There are many different size of fasteners with several thread pitches for each size.

How big of a fastener do you intend to use and how thick is the sheet metal.

If the sheet metal is less than 11 Ga (.120) let them use self tapping screws.

I will be using M3x0.5 pitch, Cheese Head SS screws, in 1.2mm thick Mild Steel sheet. What I would like to know is if the thread is made together with the hole in one operation, with a special tap, or is the hole (what size for M3?) drilled or punched and then tapped afterwards? Also, what is the process called?

You most likely will drill and then tap. I have seen some tools that have the drill and tap in one, but they don't work too well as the drill requires one speed and the tap another. The size of the tap drill (the correct term for the drill that forms the minor diameter of the threaded hole) is determined by the class of thread. there are several classes of thread depending on the application. and they are expressed in a percentage. Nomally you ask for a 75% thread, but 65% and 60% are common as well.

Tooling can be acquired to drill and tap the hole in one operation. Generally in practice a tapped hole should be threaded as deep as the diameter of the fastener. Since you only have 1.2 mm to hold the threads I recommend a sheet metal screw and punch the holes. A sheet metal screw would give you a better hold. If you are going to tap it to M3x0.5 the drill size is 2.5mm. As far naming the process drilling and tapping

There is also the process in which the hole is formed with a punch that displaces, rather than removes, material, making a slightly flared cylinder. In a 1.2mm sheet, one could form a hole 4mm deep or so. Here's a thread on the process.

I used to work in radiator manufacturing (Merriott Rads/Barlo Rads now Quinn Rads). The rads usually had a thin wall 1-2mm (varied thickness due to pressure requirements of the customer). to generate a thread for the bleed screws we used a process called flow drilling. what this essentially did was instead of removing the drilled material it funnelled it out and instead of having 1.5mm to thread we would end up with a thread up to 10mm deep if required.

Because you a using such a fine thread M3 (0.5mm pitch, on the 1.2mm you will only achieve 2 full threads).

I would recommend either flow drill and tap or preferably for a neater apperance use a pem fastener

You need to know your sheet metal process capabilities.

What is the fabrication methods used?

If you simpley call out the hole and thread size, you leave it up to

the manufacturing side to determine the method. If your working sheet metal

you normally "punch" the hole and tap it in another process, ie the self tapping screw

or drill and tap operation. If it is an up-to-date manufacturing

facility, they would have the punching/lasering and threading all in the same machine.

There is a standard for callouts on threaded holes.