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TSMC 2Q20 Record Profits Discussion

Daniel Nenni

Admin
Staff member
TSMC (NYSE:TSM) reported Q2 net income of $4B (+81% Y/Y).
Total sales were up 34% Y/Y to $10.38B.
The company lifted its FY revenue growth forecast from "mid to high single digit percentage" to 20%.
Increased demand for computer and gaming equipment due to sheltering, 5G build, and Apple's incoming iProducts.
TSMC added another $1B to its capital budget, bringing the total to $17B for 2020.
TSM shares are up 0.2% pre-market to $66.20.
Q3 Guidance: Revenue $11.2B-11.5B vs. consensus of $10.77B; GM 50-52%; Operating margin 39-41%.
FY20 capital budget to be $16B-$17B.
TSMC's figure implies foundry CAPEX could grow 20%+ this year, above the firm's modeled 13% foundry WFE growth.
TSMC's increased CAPEX is in preparation for 2021 demand.
TSMC raised 2020 revenue forecast to top 20% growth.

Asked how the Huawei ban would impact TSMC’s ability to fill up its multi-billion dollar factories:

The supply chain will adjust, Chief Executive Officer C.C. Wei told investors bluntly.

Chairman Mark Liu said that the company is progressing well in using any capacity left open. He’s putting his money where his mouth is. The company will now add another $1 billion for spending on new equipment in its 2020 plan, taking the budget as high as $17 billion." (Bloomberg).


TSMC 2Q20 Revenue by Technology.jpg

TSMC 2Q20 Revenue by Platform.png
 
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hist78

Member
It's a very interesting result. The 12% QoQ increase to make HPC (33% over total TSMC revenue) as the second largest revenue source behind Smartphone (47%) is amazing. It's a clear indication some important technology and market change are coming soon. It also spelled out the potential trouble for Intel, unless Intel's orders are the major part of this big jump.
 

Daniel Nenni

Admin
Staff member
An interesting comment in the call Q&A:

Dr. C. C. Wei "On the N6, yes, we have been over to our customer with compatible of actually the fully compatible to N7, so it will have a very good opportunity to catch the second wave of 7-nanometers product. With the same kind of strategy we offer N4 to follow that N5."

So as I understand it in regards to HVM (Apple): 5nm in 2020, 4nm in 2021, and 3nm in 2022?
 

Arthur Hanson

Well-known member
Dan, do you feel as I do, that TSM has reached critical mass and could become a much, much larger company and allow many of their partners to do the same. I feel with AI/ML combined with IOT society and the engineering world are in for some major changes of epic proportions. Data science and AI/ML management will be the key skill sets of the future and our educational/ training systems are going to have to radically change and adapt. I feel EDA may lead the charge and become a much, much larger and displace a good portion of our current business structure and systems. Any thoughts on this and what companies outside of TSM will lead the charge? Also do you have any thoughts on how this will impact semi fab equipment suppliers? Thanks.
 

Daniel Nenni

Admin
Staff member
" TSMC says that its 3nm chips will deliver a 10% to 15% hike in performance with a 20% to 25% increase in energy efficiency. Today's report mentions that Apple's A16 chip, due to be shipped in 2022, will be manufactured using the 3nm process node. "

 

hskuo

New member
" TSMC says that its 3nm chips will deliver a 10% to 15% hike in performance with a 20% to 25% increase in energy efficiency. Today's report mentions that Apple's A16 chip, due to be shipped in 2022, will be manufactured using the 3nm process node. "

It is amazing to see 3nm will have 70% logic density gain. As the last node of FinFET in TSM, I do believe N3 will be more like N20 to be last node of planar FET and become short node.
 

Fred Chen

Moderator
5nm ramp seems difficult:

From the TSMC Q2 2020 earnings conference call:

"As we observed some delays earlier this year in N5 tool deliveries due to COVID-19, we now expect 5-nanometer to contribute about 8% of our wafer revenue in 2020." (Q1 2020 expected about 10%)

"Looking ahead to the fourth quarter; we expect the continued steep ramp up of our 5-nanometer to dilute our fourth quarter gross margin by about 2 to 3 percentage points."
 

Daniel Nenni

Admin
Staff member
5nm ramp seems difficult. From the TSMC Q2 2020 earnings conference call:
"As we observed some delays earlier this year in N5 tool deliveries due to COVID-19, we now expect 5-nanometer to contribute about 8% of our wafer revenue in 2020." (Q1 2020 expected about 10%)" . "Looking ahead to the fourth quarter; we expect the continued steep ramp up of our 5-nanometer to dilute our fourth quarter gross margin by about 2 to 3 percentage points."
5nm 2020 revenue is Apple so there may be Cupertino delays built in there as well. Remember, TSMC froze 5nm based on Apples delivery schedule, same with 10nm, so there is room for further optimization. TSMC mentioned 4nm, which will be an optimization of 5nm and of course 3nm. From what I understand this is all using the same fabs/equipment.

It was interesting to read that Samsung 5nm is experiencing delays as well. Maybe COVID-19 hit the semiconductor supply chain harder than expected?
 

Fred Chen

Moderator
5nm 2020 revenue is Apple so there may be Cupertino delays built in there as well. Remember, TSMC froze 5nm based on Apples delivery schedule, same with 10nm, so there is room for further optimization. TSMC mentioned 4nm, which will be an optimization of 5nm and of course 3nm. From what I understand this is all using the same fabs/equipment.

It was interesting to read that Samsung 5nm is experiencing delays as well. Maybe COVID-19 hit the semiconductor supply chain harder than expected?
The forced Huawei pullout must have had some effect.
 

Daniel Nenni

Admin
Staff member
Good news from SEMI:

Global sales of semiconductor manufacturing equipment by original equipment manufacturers are projected to increase 6% to US$63.2 billion in 2020 compared to US$59.6 billion in 2019, before logging record high revenue of US$70 billion in 2021 on the strength of double-digit growth, according to SEMI.

Growth across a number of semiconductor segments is expected to power the expansion, said SEMI. The wafer fab equipment segment - which includes wafer processing, fab facilities, and mask/reticle equipment - is expected to rise 5% in 2020 followed by 13% growth in 2021 driven by a memory spending recovery and investments in leading-edge and China.

Foundry and logic spending, accounting for about half of total wafer fab equipment sales, will see single-digit increases in 2020 and 2021, SEMI indicated. Both DRAM and NAND spending in 2020 will surpass 2019 levels and are projected to grow over 20%, respectively, in 2021.

The assembly and packaging equipment segment is forecast to grow 10% to US$3.2 billion in 2020 and 8% to US$3.4 billion in 2021 driven by advanced packaging capacity buildup, SEMI said. The semiconductor test equipment market is expected to increase 13%, reaching US$5.7 billion in 2020, and continue the growth momentum in 2021 on the back of 5G demand.

Regionally, China, Taiwan and Korea are expected to lead the pack in spending in 2020, SEMI noted. Robust spending in China in the foundry and memory sectors is expected to vault the region to the top in total semiconductor equipment spending in 2020 and 2021.

Taiwan equipment spending, after seeing 68% growth in 2019, is forecast to contract this year but bounce back with 10% growth in 2021, with the region maintaining the second spot in equipment investments, SEMI said. Korea is expected to rank third in semiconductor equipment investments in 2020 by outstripping its 2019 levels, making it the third top spender in 2020. Korea equipment spending is projected to grow 30% in 2021 powered by the memory investment recovery. Most other regions tracked will also see growth in 2020 or 2021.
 

Portland

Member
5nm 2020 revenue is Apple so there may be Cupertino delays built in there as well. Remember, TSMC froze 5nm based on Apples delivery schedule, same with 10nm, so there is room for further optimization. TSMC mentioned 4nm, which will be an optimization of 5nm and of course 3nm. From what I understand this is all using the same fabs/equipment.

It was interesting to read that Samsung 5nm is experiencing delays as well. Maybe COVID-19 hit the semiconductor supply chain harder than expected?
Covid-19 has hit supply chains across the world. It could be the next crisis.
 

Daniel Nenni

Admin
Staff member
Covid-19 has hit supply chains across the world. It could be the next crisis.
I don't see a problem with supply with the demand decreasing on the consumer electronics side. Let's wait and see what Apple says on their call next week. I can't imagine 2H2020 being a blockbuster in regards to unit shipments.
 

Portland

Member
I don't see a problem with supply with the demand decreasing on the consumer electronics side. Let's wait and see what Apple says on their call next week. I can't imagine 2H2020 being a blockbuster in regards to unit shipments.
Not a believer in the authenticity of the Pfizer vaccine?

There's problems across the spectrum not just electronics. I had a call from a second hand source from my employer about problems they're having. To be direct there will be plenty of work for me this winter.

I'm starting to wonder how authentic the corona data is in the Democratic countries in the far east.

There been delays with product release dates with mediatek and others.
 

hist78

Member
This article's author felt TSMC's second half 2020 revenue forecast is too optimistic. But in the contract foundry business, TSMC should be able to know very well for the rest of the year at such late stage, the middle of the July.
 
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hist78

Member
I'm wondering what's the amount of TSMC's revenue, first half 2020 and the rest of the year, is coming from Intel.
 

Daniel Nenni

Admin
Staff member
Update:
-TSMC shares are up 4.1% pre-market after Intel announced a six-month 7nm product delay and yield issues.
-During the earnings call, Intel execs said the first 7nm server CPU will rely on "external and internal process technologies".
-Intel's 7nm process tech is seen as comparable to TSMC's 5nm, which recently entered volume production.
-Other potential beneficiaries from Intel's woes include TSMC customers: Nvidia, Broadcom, and Xilinx.
-Intel drops 9% as product delay offsets strong earnings.
 
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