will not be able to make the final rule interpretation before TSMC will have the next step. It is too early to confirm the supply of Huawei . TSMC revenue and profit increased significantly year-on-year in the second quarter, and it is expected that the third quarter will continue to grow
US sanctions Huawei to increase its investment. How to choose TSMC ? On the afternoon of July 16, TSMC clearly stated at the legal person briefing that the company fully complies with relevant regulations and has not received any new orders from Huawei or produced products for it since May 15. At this stage, TSMC does not plan to supply Huawei after September 14.
However, TSMC chairman Liu Deyin said that the US solicitation of opinions on Huawei’s new regulations is about to end, and it will take until the final interpretation of the regulations that TSMC will have the next step. It is too early to confirm (whether the supply is cut off).
TSMC said that the current challenge is dynamic adjustment of production capacity, and we are working with other customers and making good progress.
Huawei is the second largest customer of TSMC (NYSE: TSM/2330.TW), and contributed 214% of TSMC html revenue in 2019. TSMC is a chip for Huawei's foundry mobile phones, base stations, servers and other products, mainly involving processes including 5nm, 7nm, and 12nm.
On May 15, the US Department of Commerce launched a new round of sanctions against Huawei, directly pointing to Huawei's ability to develop its own chips. If the chips designed by Huawei and HiSilicon use software or equipment controlled by the US government, even if the production process is outside the United States, relevant companies must apply for license from the US Department of Commerce. At the same time as the new regulations were introduced, the United States gave a 120-day shipment buffer period. Therefore, the shipment of TSMC to Huawei before September 14 will not be affected, but the subsequent production capacity will be allocated.
In May, there was news that Huawei stepped up its orders to TSMC . At that time, TSMC was already evaluating the possibility of implementing Huawei orders. Liu Deyin once said at the shareholders' meeting on June 9 that the new regulations on Huawei are still in the stage of interpretation of regulations, and it is still uncertain whether it will submit a license to the United States. "We are still observing the degree of implementation of regulations and evaluating the opportunity to obtain a license after applying (to determine whether it is "very promising", "not great hope" or "no hope at all". It is not yet time to apply for a license.
If TSMC no longer produces chips for Huawei, Huawei chip production may be transferred to mainland China chip foundry SMIC in the future. However, the production process of SMIC lags behind TSMC for three generations. The most advanced production line is 14 nanometers, and 12 nanometers are still in the customer introduction stage and have not been officially mass-produced.
The reporter learned from the supply chain that due to the chip supply cut, Huawei originally planned to launch Mate, which was originally scheduled to be launched in the second half of the year due to the supply cut of chips. The production of 40 series (equipped with 5nm chips) mobile phone-related components has been repeatedly delayed, and the order volume has been reduced. Once TSMC is cut off from supplying Huawei, Huawei will hardly find an alternative in the field of high-end chip manufacturing.
TSMC released its second quarter performance report on the same afternoon. During the quarter, the company's revenue was NT$310.7 billion (10 US$380 million), unchanged month-on-month, but increased by 28.9% year-on-year. Profit attributable to shareholders was NT$120.82 billion (approximately US$4.102 billion), with NT$3.3% and 81.0% year-on-year respectively.
The second quarter performance was close to the expected upper limit previously given by TSMC . At the first quarter legal person briefing in April, TSMC pre- The revenue in the second quarter was approximately US$10.1 billion to US$10.4 billion. In the quarter, the company's gross profit margin was 53%, slightly higher than the previous expectation of about 50%-52%.
TSMC 's main revenue in the second quarter came from the 7-nanometer production line, accounting for 36%, the highest in history. The 7-nanometer production line was officially put into use in the second quarter of 2018 and became the ht in the fourth quarter of the same year. ml1 TSMC 's largest source of revenue. In the second quarter of 2020, 5-nanometer production lines began mass production. TSMC predicted at the beginning of the year that the revenue of 5-nanometer production lines will account for 10% of the total revenue this year.
TSMC is currently developing a 3-nanometer chip and is expected to be trial production in 2021, with the goal of mass production in the second half of 2022.
TSMC CFO Huang Renzhao said that due to the continuous deployment of 5G and the launch of high-efficiency computing-related products, the weak demand of other platforms has been offset, so TSMC 's performance in the second quarter continued to remain stable. He also said that in the next quarter, strong demand for 5NM and 7NM processes for 5G mobile phones, high-performance computing and IoT-related applications will be conducive to the company's revenue growth.
TSMC expects that its revenue in the third quarter will be between US$11.2 billion and US$11.5 billion, with a gross profit margin of 50%-52%.
On July 16, TSMC Taiwan stock closed at NT$357.50 per share, down 1.52%. On July 15, TSMC US stocks closed at US$66.06/ADR, down 1.34%.
