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TSMC 4th QTR Earnings Discussion

Daniel Nenni

Admin
Staff member
Here is the Video:


The transcript:


(Presentation material is attached)

Press release:

Hsinchu, Taiwan, R.O.C., January 14, 2021 – TSMC (TWSE: 2330, NYSE: TSM) today announced consolidated revenue of NT$361.53 billion, net income of NT$142.77 billion, and diluted earnings per share of NT$5.51 (US$0.97 per ADR unit) for the fourth quarter ended December 31, 2020.

Year-over-year, fourth quarter revenue increased 14.0% while net income and diluted EPS both increased 23.0%. Compared to third quarter 2020, fourth quarter results represented a 1.4% increase in revenue and a 4.0% increase in net income. All figures were prepared in accordance with TIFRS on a consolidated basis.

In US dollars, fourth quarter revenue was $12.68 billion, which increased 22.0% year-over-year and increased 4.4% from the previous quarter.

Gross margin for the quarter was 54.0%, operating margin was 43.5%, and net profit margin was 39.5%.

In the fourth quarter, shipments of 5-nanometer accounted for 20% of total wafer revenue; 7-nanometer and 16-nanometer accounted for 29% and 13% respectively. Advanced technologies, defined as 16-nanometer and more advanced technologies, accounted for 62% of total wafer revenue.

“Our fourth quarter business was supported by strong demand for our industry-leading 5-nanometer technology, driven by 5G smartphone launches and HPC-related applications,” said Wendell Huang, VP and Chief Financial Officer of TSMC. “Moving into first quarter 2021, we expect our business to be supported by HPC-related demand, recovery in the automotive segment, and a milder smartphone seasonality than in recent years.”

Based on the Company’s current business outlook, management expects the overall performance for first quarter 2021 to be as follows:

  • Revenue is expected to be between US$12.7 billion and US$13.0 billion;
And, based on the exchange rate assumption of 1 US dollar to 27.95 NT dollars,

  • Gross profit margin is expected to be between 50.5% and 52.5%;
  • Operating profit margin is expected to be between 39.5% and 41.5%.
The management further expects the 2021 capital budget to be between US$25 billion and US$28 billion.
 

Attachments

  • 4Q20Presentation(E).pdf
    607.2 KB · Views: 9

prime007

Member
$25-28b in Capex, and here we were all thinking it would be around $20b.
Yeah...that was the number that surprised the heck out of me. Tim Culpan (in Bloomberg Opinion) is stating TSMC "is making a massive move to obliterate rivals".

Culpan's key points:
1. TSMC may want to front-load spending because clients need the capacity now, not tomorrow.
2. Any customer (Apple, AMD, Qualcomm, Nvidia, carmakers) left waiting for supply is naturally inclined to shop around, so TSMC has the chance to use its resources to keep business away from rivals could be worth the money.
3. TSMC wants to win orders from Intel rather than letting them go to Samsung. If TSMC can prove its worth, Intel may shift to an "asset-light model".
4. By snapping up equipment supply from ASML and Lam Research, TSMC can slowly suck up the oxygen competitors need to breathe

Samsung is also growing & getting more competitive/customers...which TSMC sees as a long-term threat. From my limited view, I counted 3 customers for Samsung's 5nm node:
1. Ambarella's CV5 5nm 8K AI Vision Processor
2. Samsung Exynos 2100 mobile processor
3. Qualcomm's Snapdragon 888 mobile processor
 

count

Active member
Yeah...that was the number that surprised the heck out of me. Tim Culpan (in Bloomberg Opinion) is stating TSMC "is making a massive move to obliterate rivals".

4. By snapping up equipment supply from ASML and Lam Research, TSMC can slowly suck up the oxygen competitors need to breathe

My understanding is that this is a key consideration in the timing of Intel's decision to go fabless. If they want to remain an IDM, they need to make a move to secure equipment soon.

Supply is very tight right now for semis, and it's good to see TSMC committed to making sure they will have enough capacity available to it's current and future customers. Very happy to count myself among TSMCs shareholders today.
 

Daniel Nenni

Admin
Staff member
2. Any customer (Apple, AMD, Qualcomm, Nvidia, carmakers) left waiting for supply is naturally inclined to shop around, so TSMC has the chance to use its resources

Remember, TSMC is not Amazon with next day delivery. Wafer agreements are put in place before the design starts and it takes TSMC less time to build fab capacity than it takes to design a leading edge SoC/CPU/GPU.

If there is a wafer shortage TSMC customers are selling more chips than expected and it's not like they can get additional wafers from Samsung. Once a design is done to a fab it will stay at that fab.

TSMC's $28B CAPEX is a big tell as to what the future holds for the foundry landscape, absolutely.
 

count

Active member
That's a pretty big clue as to what is coming since TSMC builds fabs based on wafer agreements. My guess is that Intel is coming, absolutely.

This is pretty bullish news for Intel as well, if true (which I think it is). Assume $4-5b of that Capex is to build capacity for Intel. That's $4-5b that Intel doesn't need to spend. Of course there will be some up front costs and margins will go down slightly if they are paying TSMC for wafers instead of manufacturing in house, but probably not by that much. TSMC has already done the heavy lifting on process design so for them it's just incremental capacity. Intel probably ends up with at an extra $2b in free cash flow. They can pump that into architectural improvements.

Without in house fabs pulling it down, Intel is undervalued. A fabless Intel would be an extremely capital efficient cash flow machine.
 

Daniel Nenni

Admin
Staff member
This is pretty bullish news for Intel as well, if true (which I think it is). Assume $4-5b of that Capex is to build capacity for Intel. That's $4-5b that Intel doesn't need to spend. Of course there will be some up front costs and margins will go down slightly if they are paying TSMC for wafers instead of manufacturing in house, but probably not by that much. TSMC has already done the heavy lifting on process design so for them it's just incremental capacity. Intel probably ends up with at an extra $2b in free cash flow. They can pump that into architectural improvements. Without in house fabs pulling it down, Intel is undervalued. A fabless Intel would be an extremely capital efficient cash flow machine.

$20B TSMC CAPEX is what I heard late last year, it was raised to $17B in 2020 so a 15% bump is predictable. Adding another $8B on top of that is all Intel in my opinion. The new Intel CEO is a career Intel manufacturing guy so that could change. Interesting times for sure.
 

hkwint

Member
Internet rumor has it, TSMC will fab Intel core i3 H2 '21 on 5nm.

How likely might that be? If I understand Daniel, that's only possible if they designed it for TSMC N5 long time ago.

And didn't Apple already reserve ~90% of the N5(P) capa for 21?
 

Daniel Nenni

Admin
Staff member
Internet rumor has it, TSMC will fab Intel core i3 H2 '21 on 5nm.
How likely might that be? If I understand Daniel, that's only possible if they designed it for TSMC N5 long time ago.
And didn't Apple already reserve ~90% of the N5(P) capa for 21?

That is certainly possible. There are few secrets in the semiconductor ecosystem and I have not heard about Intel developing 5nm foundation IP, which is required before designing a chip. I only know about 3nm.

Apple uses a custom version of the TSMC processes that they do not share with other companies so no reservation is required. TSMC clearly stated that 5nm usage will be mostly SoC and HPC which means AMD, NVIDIA, and others will also be getting 5nm wafers this year. TSMC also said the increased CAPEX will be used for both 5nm and 3nm capacity.
 

hist78

Active member
During the Q&A session, every analyst tried hard to find out if the huge Capex budget has something to do with the Intel's outsourcing deal. They asked directly and indirectly through several seemly unrelated topics.

Although CC Wei kept denying to comment on any questions specific to a particular customer, at the end it seems those analysts understand what the true answer is. And we will find it out next week from Intel's earnings conference call.
 

Daniel Nenni

Admin
Staff member
According to Trendforce the decision has already been made:


I highly doubt UMC is getting any of this. I think I will wait for the Intel investor call before I dig more into it.
 
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