From the Investor call:
CC Wei:
Thank you, Wendell. Good afternoon, everyone. First, let me start with our near-term demand outlook.
We concluded our second quarter with revenue of U.S. dollar $20.8 billion, above our guidance in U.S. dollar terms. Our business in the second quarter was supported by strong demand for our industry-leading 3-nanometer and 5-nanometer technologies, particularly offset by continuous smartphone seasonalities.
Moving into third quarter 2024, we expect our business to be supported by strong smartphone and AI-related demand for our leading-edge process technologies. Looking at the full year 2024, we forecast the overall semiconductor market excluding memory to increase by about 10%, which is unchanged from our forecast three months ago. At this time, we would like to expand our original definition of foundry industry to Foundry 2.0, which also includes packaging, testing, mask making, and others and all IDM, excluding memory manufacturing.
We believe this new definition better reflects TSMC's expanding addressable market opportunities in the future. However, I want to emphasize here that TSMC will only focus on the most advanced backend technologies which help our customers in leading-edge products. Under this new definition, the size of the foundry industry was close to $250 billion in 2023, as compared to $115 billion under the previous definition.
With our new definition, we forecast the foundry industry growth to be close to 10% year-over-year in 2024. TSMC's share of the foundry industry, under our new definition, was 28% in 2023, supported by our strong technology leadership and broader customer base, we expect this one to further increase in 2024. Over the past three months, we have observed strong AI and high-end smartphone related demand from our customers, as compared to three months ago, leading to increasing overall capacity utilization rate for our leading-edge 3-nanometer and 5-nanometer process technologies in the second half of 2024. Thus, we continue to expect 2024 to be a strong growth year for TSMC.
We are raising our four-year guidance and now expect our 2024 revenue to increase slightly above mid-20s percent in US dollar terms. Next, I will talk about TSMC's capacity planning process and investment disciplines. This is important, especially when we have such high forecasted demand from AI related business.
TSMC's mission is to be the trusted technology and capacity provider for the global logic IC industry for years to come. The continual surge in AI related demand supports a strong structural demand for energy efficient computing. As a key enabler of AI applications, the value of our technology position is increasing as customers rely on TSMC to provide the most advanced process and packaging technology at scale in the most efficient and cost-effective manner.
As such, TSMC employs a disciplined framework to address the structural increase in the long-term market demand profile underpinned by the industry megatrend of AI, HPC, and 5G. We work closely with our customers to plan our capacity. We also have a rigorous and roll-out system that evaluates and judges market demand from both a top-down and a bottom-up approach to determine the appropriate capacity to build.
Our capital investment decisions are based on four disciplines, that is, technology leadership, flexible and responsive manufacturing, retaining customers' trust, and earning a sustainable and healthy return. To ensure a proper return from our investment, both pricing and cost are important. TSMC's pricing strategy is strategic, not opportunistic to reflect the value that we provide.
Today, we are investing heavily in leading-edge specialty and advanced packaging technologies to support our customers' growth and enable their success. If customers do well, TSMC should do well. For example, we are happy to see many of our customers' structural profitability improving in these past few years. At the same time, we face rising cost challenges due to increasing process complexity, a leading load, higher electricity costs in Taiwan, global fiber expansion in higher cost regions, and other cost inflation challenges. Therefore, we will continue to work closely with our customers to share our value. We will also work diligently with our suppliers to deliver on cost performance.
We believe such actions will help TSMC earn a sustainable and healthy return, so that we can continue to invest in technology and capacity to support our customers' growth and fulfill our mission as a trusted foundry partner, while delivering profitable growth for our shareholders.
Finally, I'll talk about our N2 status and A16 introduction. Our 2-nanometer and A16 technologies lead the industry in addressing the insatiable need for energy-efficient computing, and almost all the AI innovators are working with TSMC.
We expect the number of the new tape-outs for 2-nanometer technologies in its first two years to be higher than both 3-nanometer and 5-nanometer in their first two years. N2 will deliver full load performance and power benefit, with 10 to 15 speed improvement at the same power, or 25% to 30% power improvement at the same speed, and more than 15% chip density increase as compared with the N3E.
N2 technology development is progressing well, with device performance and yield on track or ahead of plan. N2 is on track for volume production in 2025 with a ramp profile similar to N3. With our strategy of continuous enhancement, we also introduce N2P as an extension of our N2 family. N2P features a further 5% performance at the same power or 5% to 10% power benefit at the same speed on top of N2. N2P will support both smartphone and HPC applications, and volume production is scheduled for the second half of 2026. We also introduce A16 as our next nanosheet-based technology, featuring Super Power Rail, or SPR, as a separate offering.
TSMC's SPR is an innovative, best-in-class backside power delivery solution that is forcing the industry to incorporate another backside contact scheme to preserve gate density and device with flexibility. Compared with N2P, A16 provides a further 8% to 10% speed improvement at the same power, or 15% to 20% power improvement at the same speed, and additional 7% to 10% chip density gain. A16 is best suited for specific HPC products with complex signal routes and dense power delivery network.
Volume production is scheduled for the second half of 2026. We believe N2, N2P, A16, and its derivative will further extend our technology leadership position and enable TSMC to capture the growth opportunities way into the future.
This concludes our key message, and thank you for your attention.
CC Wei:
Thank you, Wendell. Good afternoon, everyone. First, let me start with our near-term demand outlook.
We concluded our second quarter with revenue of U.S. dollar $20.8 billion, above our guidance in U.S. dollar terms. Our business in the second quarter was supported by strong demand for our industry-leading 3-nanometer and 5-nanometer technologies, particularly offset by continuous smartphone seasonalities.
Moving into third quarter 2024, we expect our business to be supported by strong smartphone and AI-related demand for our leading-edge process technologies. Looking at the full year 2024, we forecast the overall semiconductor market excluding memory to increase by about 10%, which is unchanged from our forecast three months ago. At this time, we would like to expand our original definition of foundry industry to Foundry 2.0, which also includes packaging, testing, mask making, and others and all IDM, excluding memory manufacturing.
We believe this new definition better reflects TSMC's expanding addressable market opportunities in the future. However, I want to emphasize here that TSMC will only focus on the most advanced backend technologies which help our customers in leading-edge products. Under this new definition, the size of the foundry industry was close to $250 billion in 2023, as compared to $115 billion under the previous definition.
With our new definition, we forecast the foundry industry growth to be close to 10% year-over-year in 2024. TSMC's share of the foundry industry, under our new definition, was 28% in 2023, supported by our strong technology leadership and broader customer base, we expect this one to further increase in 2024. Over the past three months, we have observed strong AI and high-end smartphone related demand from our customers, as compared to three months ago, leading to increasing overall capacity utilization rate for our leading-edge 3-nanometer and 5-nanometer process technologies in the second half of 2024. Thus, we continue to expect 2024 to be a strong growth year for TSMC.
We are raising our four-year guidance and now expect our 2024 revenue to increase slightly above mid-20s percent in US dollar terms. Next, I will talk about TSMC's capacity planning process and investment disciplines. This is important, especially when we have such high forecasted demand from AI related business.
TSMC's mission is to be the trusted technology and capacity provider for the global logic IC industry for years to come. The continual surge in AI related demand supports a strong structural demand for energy efficient computing. As a key enabler of AI applications, the value of our technology position is increasing as customers rely on TSMC to provide the most advanced process and packaging technology at scale in the most efficient and cost-effective manner.
As such, TSMC employs a disciplined framework to address the structural increase in the long-term market demand profile underpinned by the industry megatrend of AI, HPC, and 5G. We work closely with our customers to plan our capacity. We also have a rigorous and roll-out system that evaluates and judges market demand from both a top-down and a bottom-up approach to determine the appropriate capacity to build.
Our capital investment decisions are based on four disciplines, that is, technology leadership, flexible and responsive manufacturing, retaining customers' trust, and earning a sustainable and healthy return. To ensure a proper return from our investment, both pricing and cost are important. TSMC's pricing strategy is strategic, not opportunistic to reflect the value that we provide.
Today, we are investing heavily in leading-edge specialty and advanced packaging technologies to support our customers' growth and enable their success. If customers do well, TSMC should do well. For example, we are happy to see many of our customers' structural profitability improving in these past few years. At the same time, we face rising cost challenges due to increasing process complexity, a leading load, higher electricity costs in Taiwan, global fiber expansion in higher cost regions, and other cost inflation challenges. Therefore, we will continue to work closely with our customers to share our value. We will also work diligently with our suppliers to deliver on cost performance.
We believe such actions will help TSMC earn a sustainable and healthy return, so that we can continue to invest in technology and capacity to support our customers' growth and fulfill our mission as a trusted foundry partner, while delivering profitable growth for our shareholders.
Finally, I'll talk about our N2 status and A16 introduction. Our 2-nanometer and A16 technologies lead the industry in addressing the insatiable need for energy-efficient computing, and almost all the AI innovators are working with TSMC.
We expect the number of the new tape-outs for 2-nanometer technologies in its first two years to be higher than both 3-nanometer and 5-nanometer in their first two years. N2 will deliver full load performance and power benefit, with 10 to 15 speed improvement at the same power, or 25% to 30% power improvement at the same speed, and more than 15% chip density increase as compared with the N3E.
N2 technology development is progressing well, with device performance and yield on track or ahead of plan. N2 is on track for volume production in 2025 with a ramp profile similar to N3. With our strategy of continuous enhancement, we also introduce N2P as an extension of our N2 family. N2P features a further 5% performance at the same power or 5% to 10% power benefit at the same speed on top of N2. N2P will support both smartphone and HPC applications, and volume production is scheduled for the second half of 2026. We also introduce A16 as our next nanosheet-based technology, featuring Super Power Rail, or SPR, as a separate offering.
TSMC's SPR is an innovative, best-in-class backside power delivery solution that is forcing the industry to incorporate another backside contact scheme to preserve gate density and device with flexibility. Compared with N2P, A16 provides a further 8% to 10% speed improvement at the same power, or 15% to 20% power improvement at the same speed, and additional 7% to 10% chip density gain. A16 is best suited for specific HPC products with complex signal routes and dense power delivery network.
Volume production is scheduled for the second half of 2026. We believe N2, N2P, A16, and its derivative will further extend our technology leadership position and enable TSMC to capture the growth opportunities way into the future.
This concludes our key message, and thank you for your attention.
