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Interesting TSMC comments on Q2 2021 Earnings Call

Daniel Nenni

Staff member
TSMC CEO and Chairman.jpg

According to TSMC:

- Gross margin decreased 2.4 percentage points sequentially to 50% mainly due to N5 dilution, the slower rate of cost improvement and the absence of positive inventory revaluation.

-In U.S. dollar terms, second quarter capital expenditures totaled USD 5.97 billion.

- 5-nanometer process technology contributed 18% of wafer revenue in the second quarter, while 7-nanometer accounted for 31%. Advanced technologies, which are defined as 7-nanometer and below, accounted for 49% of wafer revenue

- Moving on to revenue contribution by platform. Smartphone decreased 3% quarter-over-quarter to account for 42% of our second quarter revenue. HPC increased 12% to account for 39%. IoT decreased 2% to account for 8%. Automotive increased 12% to account for 4%. And DCE decreased 12% to account for 4%.

-In the near term, we continue to observe both short-term imbalances in the supply chain driven by the need to ensure supply security, as well as a structural increase in long-term demand. While the short-term imbalance may or may not persist, we expect our capacity to remain tight throughout the year and into 2022 fueled by strong demand for our industry-leading advanced and special technologies.

-For the full year of 2021, we now forecast the overall semiconductor market excluding memory to grow about 17% while foundry industry growth is forecast to be about 20%. We now expect -- for TSMC, we are confident we can outperform the foundry revenue growth and grow above 20% in 2021 in U.S. dollar terms.

-We expect the automotive component shortage from semiconductor to be greatly reduced for TSMC customers starting this quarter.

-TSMC's N5 is the foundry industry's most advanced solution with the best PPA. N5 is already in its second year of volume production with yields well on track. N5 demand continued to be strong, driven by smartphone and HPC applications and we expect N5 to contribute around 20% of our wafer revenue in 2021.

-3 nanometer risk production is scheduled in 2021, and production will start in second half of 2022. Our 3-nanometer technology will be the most advanced foundry technology in both PPA and transistor technology when it is introduced.

- Moving into third quarter 2021. We expect our business to be supported by strong demand for our industry-leading 5-nanometer and 7-nanometer technologies driven by all 4 growth platforms, which are smartphone, HPC, IoT and automotive-related applications. On the inventory side, we expect our fabless customers' overall inventory to exit second quarter of '21 at a healthy level. We expect our customers and the supply chain to gradually prepare higher levels of inventory in the second half of the year as compared to the historical seasonal level, given the industry's continued need to ensure supply security following supply chain disruptions due to COVID-19 and uncertainties brought about by geopolitical tensions

-The first wave of U.S.-hired engineers arrived Taiwan in late April for training on 5-nanometer technology. Construction of the fab has already begun with equipment moving in scheduled for second half 2022. Phase 1 volume production of 20,000 wafer per month of 5-nanometer technology will begin in first quarter 2024.

-In China, as our fab construction in Nanjing has already completed in 2017, we have completed the Phase 1 volume ramp in third quarter 2020, now reaching 25,000 wafer per month capacity of 16-nanometer technology. We are further expanding our presence in Nanjing with 28-nanometer technology to support our customers' urgent needs with volume production beginning in second half 2022 and reaching 40,000 wafer per month capacity by mid-2023.