TSMC's $3.8B prepay to secure N3 capacity?

[Daniel Nenni]

In their recent 6-K TSMC lists a $3.8B customer prepay for 2022/2023 capacity. I know Apple pre pays but not $3.8B. Who else besides AMD is betting big on N3? Intel? QCOM? Nvidia? Thoughts?

From the Q3 2021 investor call:

"On financial ratios. Accounts receivable turnover days decreased 2 days to 40 days, while days of inventory remained at 85 days. Now, let me make a few comments on cash flow and Capex. During the third quarter, we generated about 319 billion NT cash from operations, including some customer prepayments..."

Mehdi Hosseini
Thank you. And my follow-up has to do with your earlier commentary on customer prepayment. In the past, you've had one or two largest customers that had a large prepayment. Should I assume that there is diversification and a larger number of customers that are providing these prepayments?

Jeff Su
Okay. Mehdi's second question is on customer prepayments. He observes that in the past we may have -- may have had 1 or 2 customers who do prepayments. He wants to know, are we seeing a diversification, are we seeing a larger number of customers doing prepayments today?

Wendell Huang
Okay, Mehdi. Let me answer this question. Yes, in the past, there was only 1 or 2 customers providing the prepayments. But as we've been talking about now, we expect to invest higher capacity, higher capital expenditures in the next few years to satisfy the strong demand. And in order to secure our customers' commitment, we are able to secure the prepayments for some of those customers, and the number of the customer, I cannot disclose, but it's more than before.

 

[count]

3nm isn't on AMD roadmap until 2H 2023. That doesn't mean it's not AMD but makes it less likely.

My guess is it's Intel in line with recent reports of them locking down 3nm capacity.

https://www.techspot.com/news/90780-intel-has-reportedly-secured-majority-tsmc-3nm-production.html

 

[hist78]

Graphcore of UK is another TSMC 3nm early adopter.

 

[hist78]

My observation is that TSMC adopted a practice to allocate some capacity from their newest or best process to some smaller players. Those customers might be much smaller than Apple or Qualcomm but they have some interesting products with unique market potential.

 

[VCT]

I bet it's Intel. (Let's just check Intel's financial report for prepayment)
Intel's order to TSMC maybe larger than people think.
Of course I don't know the number.

But currently Intel is hiring a lot of people in Taiwan to work with TSMC.
The number of people they are hiring is shocking to me.

 

[hist78]

I bet it's Intel. (Let's just check Intel's financial report for prepayment)
Intel's order to TSMC maybe larger than people think.
Of course I don't know the number.

But currently Intel is hiring a lot of people in Taiwan to work with TSMC.
The number of people they are hiring is shocking to me.

That's interesting because those people Intel hires today are probably too late for new products Intel is going to release in 2022. Are they preparing something bigger in the following year(s)?

 

[VCT]

That's interesting because those people Intel hires today are probably too late for new products Intel is going to release in 2022. Are they preparing something bigger in the following year(s)?

For sure. You can tell from TSMC's 3-year 100 billion CAPEX plan. Without Intel's commitment. The CAPEX won't be that huge.